Prices were up strongly again at most points Friday as nearly all of the East braced for a weekend in which peak temperatures would reach about 90 degrees or higher. The cash market also continued to have strong prior-day futures support from the 14-cent advance by the July natural gas contract on Thursday.
There were quite a few instances of softer numbers, however, in the West and Midcontinent. Price weakness was most extreme in the Rockies, where dollar-plus plunges were in response to the fact that outside 100-degree thermometer levels in the desert Southwest, weather is generally moderate to cool in the rest of the West and on either side of the Canadian border. However, there apparently was enough chill in the Pacific Northwest and Western Canada to generate gains at Sumas, Stanfield, NOVA Inventory Transfer, Westcoast Station 2, Malin and the PG&E citygate.
Most of the market recorded gains of a little more than a nickel to as much as about 80 cents. Most of the largest upticks were at Northeast citygates. The minority losses ranged from a little less than a nickel to about $1.55.
Prior-day screen support for cash gas remains strong for Monday after July futures rose another 17.4 cents. But once again all of the hullabaloo was happening over in Nymex’s crude oil pit, where the July contract briefly topped $139/bbl before settling for a $10.75 gain on the day (see related story).
The Algonquin citygate saw the day’s biggest advance, partially due to a major curtailment of Maritimes & Northeast U.S. volumes running through Saturday (Dracut was again minimally traded).
But the highest prices in the land were being realized at the Florida citygate, which averaged about $15.30 when not only did Florida Gas Transmission (FGT) extend an Overage Alert Day (OAD) into its ninth day Friday, but Gulfstream added an Action Alert of its own to further tighten supplies in the baking Sunshine State (see Transportation Notes). Production-area prices into FGT also made large gains.
The lengthy OAD is not so bad, said a utility buyer in Florida; “it’s struggling to keep paying” ever-higher spot gas prices that’s the problem. Gulfstream didn’t announce its Action Alert until early afternoon, so it didn’t impact morning trading because people weren’t aware of it then, he added. He said he and others were having to shuffle some gas nominations around in response Friday afternoon. He noted that the citygate got as high as $16, saying, “I know because we paid it.”
On the other side of the nation it was quite a different story. SoCalGas issued a high-linepack OFO (see Transportation Notes), and the negative price impact was felt not only at the Southern California border (down nearly 70 cents) but in the Rockies and Southwest basins as well.
Meanwhile, the eastern heat wave will extend through the coming week. According to the National Weather Service’s six- to 10-day forecast posted Friday, from midweek through the weekend the area of greatest above-normal temperatures will be shifting into the lower Northeast and Mid-Atlantic area.
There was very strong demand from the Northeast, especially from power generation interests, according to a Texas marketer. There were big price spreads from the Gulf Coast to the market area, so any suppliers with transport capacity were doing well, he said.
The marketer said he looks for prices to keep going higher Monday. Very hot weather will still be blanketing most of the East and industrial load will be returning after the weekend, he said.
The Rockies producer who had observed a regional basis blowout Thursday in which the CIG average was at a $4.15 deficit to Henry Hub (see Daily GPI, June 6) was astounded to see the gap grow to about $5.80 Friday. Uttering a Charlie Brown-like “Good grief!” he noted that this was a new 2008 record on the differential. “This is wider than last year — in the days before REX! I just can’t believe it’s [Rockies Express] operating at capacity,” he added.
The producer suspected that the unusual widening of the basis differential was due to the “Friday factor” together with moderate weather in the lower Rockies.
The industry is highly “overvalued” on gas at present, commented an industrial end-user. He noted a 1998-2008 average growth in PJM power prices of 12-13%/year and said that was “almost completely” attributable to natural gas pricing. He expects 16-17% gas price growth by 2013 and predicted that natgas futures will see a $17 print within the next year.
It wasn’t all gloom and doom for the end-user, though. Gas prices are hurting, of course, but the prices of the commodities that his company produces have seen the same skyrocketing growth as gas, “so it kind of evens out,” he said.
A week after reporting a drop of 14 in the number of rigs drilling for gas in the U.S. (see Daily GPI, June 2), Baker Hughes said its count had rebounded by exactly the same amount in the week ending June 6 (https://intelligencepress.com/features/bakerhughes/). One rig exited the Gulf of Mexico, but the onshore tally rose by 15, Baker Hughes said. The count was up 1% from a month earlier and 2% higher than the year-ago level.
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