A bit of heating load may be creeping into cash market dynamics as overnight lows in the Rockies dip into the mid to upper 30s, and a few parts of the South may see a fair amount of power generation demand Thursday as highs around 90 are due in parts of Florida and the New Orleans area. Overall weather fundamentals remain on the light side for gas prices, but the market recorded increases at nearly all points Wednesday.
A modest bit of backing from the previous day’s 3.3-cent rise by October futures helped produce cash numbers ranging from flat to nearly 13 cents. The only backsliders were a couple of PG&E-related points that fell by less than a nickel as the utility extended a high-inventory OFO on its California Gas Transmission system into a second day but loosened the imbalance tolerance.
PG&E citygate volumes shrank significantly in trading on the IntercontinentalExchange platform from 1,095,000 MMBtu Tuesday to 917,000 MMBtu Wednesday.
Prior-day futures support was fairly modest for Wednesday’s cash market, but it will be much stronger Thursday after the prompt-month contract soared by just over a quarter (see related story).
It was hard to see how the surge of chilly weather in the Rockies could have much price impact since the region is lightly populated. And warmth in most of the South will remain limited to the mid 80s, with some sections of Texas peaking in the low 70s.
The only serious heat remains in the desert Southwest and interior California; even the Phoenix area has retreated to highs in the mid 90s. Moderate to cool remains the dominant outlook for the Northeast, Midwest, Plains, Pacific Northwest and southern Canada.
A Texas-based marketer said he is seeing little change from last week in generally moderate weather, so this week’s bullish streak “seems stronger than it should be.” However, he considered it a sure bet that Wednesday’s screen spike should keep cash quotes rising Thursday. He noted that even with the current price strength, market activity has been “pretty slow.”
It’s still a little too early for any bidweek price discovery, the marketer said.
The weather is pretty darn comfortable in the Midwest, “so where are these higher [cash and futures] prices coming from?” asked a marketer in the region. Her company was glad now to have bought pretty heavily in the spot market back around the Labor Day weekend when many pre-holiday prices were averaging less than $2, she said. The marketer said the Midwest forecast calls for colder weather next week with highs in the 60s, but added that shouldn’t be affecting prices right now.
The National Weather Service looks for below-normal temperatures during the Sept. 28-Oct. 2 workweek almost everywhere (except for normal conditions in the southern half of the Florida peninsula) east of a line running southwestward from the Upper Peninsula of Michigan to western Iowa before turning south through the eastern ends of Kansas, Oklahoma and Texas. Its six- to 10-day forecast posted Tuesday afternoon predicts above-normal readings in a large section of the west extending from Southern California through all of New Mexico at the southern end and extending through the Rockies into southern Montana and the western half of South Dakota.
SunTrust Robinson Humphrey analyst Cameron Horwitz expects a 67 Bcf storage injection to be reported for the week ending Sept. 18, which he said is essentially in line with the previous report’s 66 Bcf as lower power generation demand was largely offset by an increase in industrial demand and higher U.S. gas exports to Canada.
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