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Heat, Futures Strength Boost Most Cash Points
A screen spike of 36.6 cents a day earlier and ongoing heavy power generation load from high temperatures in the vicinity of 100 degrees across nearly all of the southern half of the U.S. trumped milder conditions in northern market areas and the usual decline of industrial load over a weekend in causing prices to keep rising at a sizable majority of points Friday.
Price movement was mixed again as several points, mostly in the Rockies and mild Northeast, were flat to about 20 cents lower. Gains ranged from 2-3 cents to a quarter or so and tended to be strongest in the South Texas and East Texas sections of the Gulf Coast and in the Southwest.
Waha was up nearly 20 cents as gas there was in demand for power generation to the west in the desert Southwest, to the north in the Midcontinent where pro golfers competed Friday in the PGA Championship in Tulsa in 100-degree weather and to the east in the sizzling intrastate Texas market.
Besides the support that Monday’s cash market will get from returning industrial load, it also will have positive guidance from futures again. Buzz about rising tropical activity in the Atlantic basin prompted Nymex traders to tack on another 23.4 cents to the September natural gas contract Friday even though there was no near-term threat to Gulf of Mexico production.
After a so-far uneventful 2007 hurricane season, things were beginning to stir a little Friday. A news story quoted James Cordier, president of Liberty Trading Group in Tampa, FL, as saying, “A disturbance just left the coast of Africa, and it looks like it has a little bit of teeth.” The report also said Addison Armstrong, an analyst at TFS Energy Futures LLC in Stamford, CT, thought the wave had the “potential” to develop into a named tropical storm and reach the Gulf of Mexico in about two weeks. Forecasters also were monitoring a low-pressure system in the western Caribbean Sea (see futures story).
While the Midwest would join the Northeast in enjoying a weekend respite from the heat, above-normal temperatures are due to return to the Midwest this week. The South and Southwest will get no respite at all, though, as dangerously high heat levels are expected to hang around all week.
Henry Hub ended the week trading at a discount of a little more than 20 cents to September futures.
Hot weather was the big driver of Friday’s overall cash gains, a Gulf Coast trader said, but it didn’t hurt to have solid backing from the futures market. A bona fide summer has finally arrived big-time in the South after a relatively mild June and July, he added. The early-season mild weather was helping keep gas prices depressed to some degree earlier, he said, “but at least my recent electric bills have been lower than usual.” Cash prices should remain firm for a while longer because above-normal temperatures will be in effect again this week in most of the U.S., he said.
The trader said his independent producer clients connected to Southern Natural Gas hadn’t lost any supplies from the Gate 6 outage (see Transportation Notes) because they don’t have offshore production, but they did benefit price-wise from the reduction in available supply. He noted that Florida Gas Zone 3 and Transco Stations 65 and 85 were the only Gulf Coast points that traded above Southern Friday. However, Southern lost 8 cents as the pipeline was ramping back up on previously shut-in production.
The number of drilling rigs actively searching for natural gas in the U.S. rose by 17 during the week ending Aug. 10, according to the Baker Hughes Rotary Rig Count (https://intelligencepress.com/features/bakerhughes/). The Gulf of Mexico count fell by two, Baker Hughes said, but that was more than offset by an increase of 19 active onshore rigs. The total tally was 1% lower than a month earlier but up 6% from the year-ago level.
Citigroup analyst Tim Evans expects sharply lower additions to storage this week and next week. He projects injections of 30 Bcf and 26 Bcf for the weeks ending Aug. 10 and Aug. 17, respectively.
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