The cash market was moderately softer for the most part Thursday, although quite a few points, primarily in the Northeast and Gulf Coast, turned in flat showings. Most losses were in single digits; those of a dime or more were concentrated in the West and Midcontinent, led by intra-Alberta’s drop of about C25 cents.
Thursday’s overall decline tended to reinforce some traders’ belief that Wednesday’s rally in eastern markets was an aberration, because the same negative factors remained in place: almost non-existent weather load in most areas, burgeoning storage inventories and lack of any tropical storm activity near the Gulf of Mexico.
A cold front was already settled into the Northeast, and one moving southward from Canada was expected to have parts of the Midwest setting record lows for the date Friday, according to The Weather Channel. The South is experiencing close-to-normal summer heat and humidity, but can look forward to its own cold front Saturday. The West had some of Thursday’s greater price softness despite being the region with the hottest weather along the West Coast and in the desert Southwest.
The Energy Information Administration estimated a 78 Bcf rise in storage levels during the previous week. The volume was slightly below the consensus area of prior expectations but might have been considered bearish because a large build occurred during a period of tropical storm disruptions of offshore production, one source pointed out. However, Nymex traders sent natural gas futures more than a dime higher, largely riding the coattails of yet another record in the crude oil contract for September, which expires Friday.
Crude established another all-time intraday high of $48.75/bbl before retreating slightly to a record daily settlement of $48.70, up $1.43. Traders who had been skeptical of an Iraqi rebel cleric’s promise Wednesday to evacuate the mosque in Najaf that is regarded as the holiest by Shiite Muslims were justified in their doubts, because fighting around the mosque continued Thursday and Iraq’s oil exports remained severely curtailed.
Because loads currently are so low due to mild weather, virtually no market impact was detected from the shutdown of Duke Energy’s Moss Bluff storage facility northeast of Houston, where an explosion and fire occurred early Thursday morning (see related story).
“Cash gas is so goofy,” remarked a Houston-based marketer. He was having trouble rationalizing how eastern prices managed to rise Wednesday and then “hang in there” somewhat with mostly small drops Thursday. Besides the weak fundamental support for reasons mentioned above, he noted, “There’s not that much storage space left” as an alternative for gas finding a home, which should argue for even more bearishness. “We’re seeing the biggest spread ever between October and November futures,” which means people are expecting the October market to be extremely weak with storage virtually full for all practical purposes.
The marketer did say that in the Chicago area, it seemed like more people than usual went short on baseload supply for August, and they’ve been rewarded with a much softer aftermarket (Thursday’s citygate average was a little more than 60 cents below the NGI index). Their buying of swing gas may be contributing to keeping the market firmer than one might expect, he said. However, he expects prices will fall further on Friday, citing the dropoff in weekend industrial load as an additional negative influence. Thursday’s screen advance was mostly based on oil’s strength, “so I don’t think it will be enough” to prop up prices for the weekend, he said.
Tropical Storm Danielle was nearly stationary as it remained away from North America and was expected to be downgraded to a depression soon.
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