Prices continued to advance at a solid majority of points Tuesday, but the gains were considerably less robust than Monday’s, suggesting that this week’s heat-inspired rally may be starting to lose steam. Mixed price movement remained in play as a few scattered points saw flat quotes or modest declines.
The overall upticks ranged from 2-3 cents to a little more than 35 cents. Most of the largest increases occurred in the Rockies; the Gulf Coast was something of a jumbled mix of both large and small gains.
The cash market, which had strong prior-day futures support both Monday and Tuesday, will have to struggle to keep advancing Wednesday in the face of a 30.8-cent screen plunge Tuesday.
Tropical Storm Chantal may have caused an initial stir just by coming into existence overnight, but it quickly died out as a market factor when people learned it was off the Northeast coast and apparently heading toward Greenland or Iceland in the North Atlantic. The National Hurricane Center (NHC) reported that as of 5 p.m. EDT Chantal’s center was about 235 miles south-southeast of Halifax, NS, and moving toward the northeast at nearly 26 mph. Even more telling about the storm’s lack of importance to the gas market was NHC’s prediction that Chantal could lose tropical characteristics either Tuesday night or sometime Wednesday.
Florida Gas Zone 3 in Louisiana, which had been one of the prime price beneficiaries of an Overage Alert Day (OAD) issued by Florida Gas Transmission late last week, instead fell Tuesday even though another OAD was issued (see Transportation Notes). The reason may have been the extremely lenient imbalance tolerance of 35%. However, the Florida citygate rose about a quarter and Florida Gas Zone 2 was up 15 cents.
Temperatures are slowly creeping upward in the East, but still remained capped in the low 90s in nearly all cases. Several Midwest metro areas were expected to peak around 92 Wednesday, but Philadelphia was the only big Northeast city expected to get that high. Some parts of the South will see highs of 93 or so, but cooling load is still a bit subpar overall in the region going into August.
Most of the West’s triple-digit temperatures are in the desert Southwest and inland California. Despite their price strength Tuesday, Wednesday’s highs will be a few degrees lower in the Rockies.
A producer who trades the Northeast said there is “a good chance” of cash prices remaining on the rise Wednesday because he thinks there’s enough heat to overcome Tuesday’s big screen loss. “It’s really hard to say, though,” he added. Daily numbers started strong in the Northeast and later dropped pretty hard, but there was a little rebound near the end of trading.
However, it looks like it’s going to take a hurricane in the Gulf to keep this market rising after Wednesday, he said, because heat levels aren’t all that impressive yet. He noted that analysts were taking some interest in a tropical wave heading toward the Leeward Islands at the eastern edge of the Caribbean sea.
Contrary to a marketer’s lament of very little buying interest during bidweek, the producer said he didn’t see much slackening of buying by his usual Northeast customers during August baseload trading.
On the other hand, a marketer representing several Gulf Coast independent producers expected the futures dive to outweigh cooling load as the chief cash market influence, saying he didn’t expect the cash rally to continue. “You’d think oil would be able to pull gas higher, but not so,” he said (September crude futures soared by $1.38 to close at $78.21/bbl, the highest daily settlement ever recorded at Nymex). The crack spreads and frac spreads are very strong for the oil people, he noted, but that doesn’t necessarily translate into support for gas prices.
It was a very quiet bidweek for his company, the marketer continued. He was glad it finished trading early as usual because he understands that its traders would have been battling with other suppliers for very few buyers if it had waited longer.
The 2007 rapid storage refill pace continues unabated. Southern Natural Gas said as of July 26, its two facilities contained 51.0 Bcf, or 85% of total working capacity of 60.0 Bcf.
The National Weather Service (NWS) expects relatively high heat levels to continue in the eastern U.S. next week. In its forecast for for the Aug. 6-10 workweek, the federal agency predicted above-normal temperatures almost everywhere east of a line running southward through the eastern ends of Montana and Wyoming and then through central Colorado before curving southeastward into the Texas Panhandle and North Texas before ending at the Gulf Coast border of Louisiana and Texas. The only exception is normal conditions in Maine and upper Vermont and New Hampshire. NWS looks for below-normal readings in the southern tip of Texas and everywhere west of a line going south through central Montana and along the eastern edge of Idaho into eastern Utah and Arizona.
Ron Denhardt of Strategic Energy & Economic Research Inc. is expecting a 77 Bcf storage injection to be reported for the week ending July 27. Going further out, Citigroup’s Tim Evans looks for builds of 75 Bcf, 65 Bcf and 60 Bcf during the weeks ending July 27, Aug. 3 and Aug. 10, respectively.
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