Flat quotes for Questar made it the only point failing to bow to weak fundamentals and five straight prior trading days of falling futures Thursday. The rest of the cash market saw price drops ranging from a little less than a nickel to about 55 cents.
Nearly all of the declines were in double digits. With high levels of heat already occupying the desert Southwest and warmer than average temperatures forecast into the weekend for the Pacific Northwest and intermountain West, the Rockies, Permian/San Juan Basins and Pacific Northwest markets tended to record the smallest losses.
Most of the largest drops occurred at Gulf Coast, Midcontinent/Midwest and Northeast locations as only a little air conditioning load remains in the northern market areas. Florida Gas Zone 3 saw the day’s top decline as highs in the Florida market area are expected to fall to around 90 degrees or less Friday. Excluding Florida Gas Zone 3, Thursday’s softness was capped at 35 cents or so.
The Energy Information Administration exceeded consensus estimates centered around 30 Bcf when it estimated a storage injection of 37 Bcf for the week ending Aug. 11. Nymex traders responded promptly to the report’s bearish nature by taking the September futures contract to its low for the day of $6.450 within a minute of the EIA announcement (see futures story). But there must have been some reconsideration that afternoon — possibly due to the build still reducing the current surpluses compared to a year ago and the five-year average — as the screen recovered by nearly a quarter to settle at $6.689, down 7.7 cents. The Producing region recorded another net withdrawal of 4 Bcf, but that was handily offset by the East region and West region additions of 37 Bcf and 4 Bcf, respectively.
Chances of another cash rally Friday like the one at midweek are quite low. Sources ticked off several reasons: the screen extended its slide that began Aug. 9; outside of western heat, temperatures are expected to range from seasonal to below-normal in most of the East through next week; and the usual slump of industrial demand over a weekend will come into play in Friday’s trading.
Nearly all points in South and East Texas fell by more than 20 cents despite the Electric Reliability Council of Texas reporting a new record for electric consumption Thursday (see story in Power Market Today).
In an effort to accommodate more storage injections than usual, Columbia Gas has asked FERC to allow the pipeline to temporarily increase its working gas capacity by 6.5 Bcf at 11 fields (see related story).
The Atlantic Basin scene remains quiet. A low-pressure area remained off the South Carolina coast Thursday without developing into a tropical depression, and wind shear blowing across this low should prevent it from developing any farther, according to The Weather Channel (TWC). The system is drifting to the west and should move inland sometime from later Thursday through Saturday, bringing cooling rains and dampening power generation load for gas in the area. An upper-level low in the eastern Gulf of Mexico was not expected to get any better organized in the next 24 hours and possibly may reach the Texas coast over the weekend, TWC said.
A Midcontinent producer said he had been kind of surprised that prices were able to continue rallying at most points Wednesday after so many preceding days of screen weakness and with so little cooling load left in northern market areas. He guessed that cash traders were paying more heed to bearish price influences Thursday.
Right now the high heat is concentrated in the Ark-La-Tex region, Midcontinent, Tennessee Valley Authority service area and desert Southwest, the producer went on, and there’s not much of it in the rest of the nation. He said a contact in Indiana told him the overnight low there was around 50 degrees.
Panhandle Eastern basis for September is looking like minus 58 cents at this point, he said. Meanwhile, Michigan citygates’ intramonth basis spread from Henry Hub has contracted a lot, he added. They started the month 35 cents below the Hub but the gap has shrunk to about a nickel now, he said.
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