The continuation of very hot temperatures in much of North America, with an assist from Wednesday’s futures advance of nearly 31 cents, enabled a rebound at nearly all points Thursday. Several flat to lower points were scattered among gains that ranged from a couple of pennies to about 30 cents.
The Florida citygate saw the day’s biggest loss by far of about 40 cents (most of the others were small) after Florida Gas Transmission lifted an Overage Alert Day that had been in effect for six days. Production area numbers also were relatively weak amid the overall rally, with Florida Gas Zone 3 flat and Florida Gas Zone 2 up only about a nickel.
The Energy Information Administration fell a bit short of consensus expectations in reporting a storage build of 59 Bcf for the week ending July 14. Nymex traders had a bullish response in sending August futures up 22.9 cents on the day. Despite the gain to $6.091, Henry Hub cash quotes in the mid $6.10s still maintained a premium to the screen.
A cold front was already pushing temperatures lower in most of the Midwest Thursday, and another one would do the same for the Northeast and Mid-Atlantic by Saturday. Also, highs in the Rockies will be dropping into the low 80s Friday, The Weather Channel said. Otherwise, except for coastal California this week’s power generation load-boosting heat wave will continue largely unabated.
The National Weather Service (NWS) indicates that heat will be returning to the Northeast early next week but much of the rest of the U.S. will be returning to more seasonable conditions. In its six-to-10-day forecast for the July 25-29 period, NWS looks for above normal temperatures in the Northeast along with the northern Mid-Atlantic and northeast Michigan. It also expects them in peninsular Florida and along the Georgia and South Carolina coasts, and from western Arizona through California, Nevada and the Pacific Northwest and in a strip along the Canadian border as far east as northwest Minnesota. Below normal readings are due in most of Texas, the Midcontinent, Arkansas, Louisiana and western Mississippi and Tennessee.
The midweek cooldown in the Northeast has taken a toll on Transco throughput. Nominated flows Thursday at Transco Station 65 were down 144,000 MMBtu/d from the day before, while Transco Zone 6-New York City volumes fell 88,000 MMBtu/d, according to analysis by Bentek Energy (https://intelligencepress.com/features/bentek/).
A Midcontinent producer said he was in the process of moving to Oklahoma from Texas, which he conceded was “maybe not such a good idea” in the midst of sustained 100-degree-plus temperatures. Once again OGT prices were outstripping most of their interstate neighbors such as ANR, Panhandle Eastern and NGPL Midcontinent because of the intrastate air conditioning demand. Most generators are forced to run their gas-fired peaking units to keep up, he said. And with more gas staying home than usual in the Midcontinent, and that was helping pull up Midwest quotes even with the market area cooling off.
“Bottom line it’s looking good for Oklahoma producers, but there still seems to be more supply than demand,” he continued. It was best to sell early Thursday because prices were going down late, the producer said. He judged it something of a toss-up on Friday’s price direction, “but if I had to guess I would say they will go up.”
A Calgary-based producer said besides the mildly bullish storage report, she thought the screen rose again because the “market was oversold” and many Nymex traders were short-covering. Heat in the U.S. West hasn’t really changed in quite a while, so she didn’t think that had all that much to do with rallying cash prices Thursday. But heat is returning in Alberta, and it’s been pretty warm lately in central Canada lately, she said.
Noting temperatures expected to approach 100 degrees or more Friday in much of the Pacific Northwest, the fuel buyer for an electric utility in the region said that of course, his company would dispatch its most efficient generation units first, but confirmed that he was buying more gas Thursday than in recent weeks in order to be prepared to switch on the gas-fired peaking facilities.
Looking ahead to the upcoming bidweek, a utility buyer in the South said despite the ongoing heat wave and August’s reputation for more of the same, his company will be buying “very little baseload, just 10,000 MMBtu/d or so.” The primary reason is because its storage account is something like 83-83% full, he said. There’s still plenty of time to fill the capacity, but his utility is “keeping the door open for lower prices as we approach the end of injection season,” he added. “If cash craters below the $5 level, we’d probably buy extra daily gas in August.”
Tropical Storm Beryl, packing sustained winds of 60 mph Thursday afternoon, was given a chance of brushing against the New England coast sometime Friday, which would further subdue power generation load in the Northeast.
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