The cash market continued to move higher at most points Friday, but at a substantially reduced rate from the spikes seen on Monday, Tuesday and Thursday of last week. Several locations were flat to nearly a quarter lower, reflecting forecasts that some areas would see a bit of moderation from cold weather over the weekend and the typical drop of industrial load.
But weather-based demand, futures strength and a cash-screen convergence effort remained in play for a majority of the market, resulting in gains ranging from 2-3 cents to about 35 cents.
Despite major weakness among Nymex’s petroleum-based offerings, November natural gas futures continued to lend support to Monday’s cash quotes with an advance of 10.9 cents Friday.
The Southern California border rose nearly a dime despite SoCalGas cautioning shippers that nearly full storage facilities meant that reductions in injection capacity are on the way (see Transportation Notes). But the PG&E citygate was essentially flat even though the utility lifted a systemwide high-inventory OFO Saturday.
What The Weather Channel (TWC) called a “strong” cold front was due to move into the Midwest Saturday and reach the Northeast Sunday, keeping heating demand in those regions fairly strong. The western end of the South could have some air conditioning load returning by early this week, as Houston’s forecast called for highs in low to mid 80s Monday and Tuesday. However, the South’s eastern section will be feeling some “frosty morning lows” Monday through Wednesday, TWC said.
Meanwhile, much of the interior West was expected to see highs 10 to 25 degrees below average (30s and 40s) over the weekend, but the West Coast states and Arizona would remain mild to warm.
It’s “a little bit chilly” in the Midcontinent but not all that cold, said a producer in the region. But anytime there’s some space left open in storage, people will buy more gas, he added. He figured that withdrawals during the cold spells experienced over the last two weeks have created more space. But, he added, a lot of people are trying to preserve their inventories until heating season officially starts, so they’re buying swing gas instead.
Another factor behind last week’s mostly strong prices, the producer continued, is that “a lot of nukes are down” currently, so gas-fired peaking units are often being used to replace the nuclear generation. There’s still a huge amount of gas supply available, but obviously it was getting bought last week, he said.
However, the producer expects weak fundamentals will come back into play in the first week of November when the nuclear plants begin returning to service and storage withdrawals start to supplant spot gas purchases.
For a western marketer, Friday was “pretty quiet. We weren’t really very active.” One reason was that price spreads from north to south were very narrow, he said, so his company couldn’t cover transport costs from Canadian export points. Also, he noted that Stanfield averaged about a nickel above Malin and concluded, “That [moving gas from Stanfield to Malin] is not going to work.”
The marketer felt that cash-screen convergence was a significant part of Friday’s continued upward price movement. He also said prices were rising in late deals, which makes further cash gains Monday fairly likely.
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