Spot prices rode the power generation load-boosting impact of hot weather to further gains Wednesday. With the exception of a couple of flat Midcontinent pipes, quotes were much like the day before in finding a range of about a nickel to nearly 20 cents. The Northeast recorded most of the larger upticks as regional temperatures continued to creep higher.
Growing potential for the first significant development of the Atlantic hurricane season also contributed to generally bullish trading moods. Hurricane Hunter aircraft were due to check out a tropical wave south of Hispaniola (Haiti and the Dominican Republic) in the Caribbean Sea Wednesday afternoon. “There is no evidence of a surface circulation yet, but upper-level winds are becoming more favorable for a depression to develop,” The Weather Channel said.
Sources agreed that the cash market should be able to eke out at least one more day of modest price strength Thursday. The screen’s rise of almost a dime Wednesday and the possibility of a tropical storm should be sufficient for another day of rising prices, said a Gulf Coast trader. Friday probably will be soft because of moderating heat levels predicted for the weekend and early next week, he went on, but that will depend a lot on Thursday morning’s storage report and whether the tropical wave in the Caribbean becomes a tropical depression or tropical storm by then.
A marketer who trades mostly Louisiana points said there was “plenty of market out there currently because of the heat, but I’m hearing temps may be dropping by the weekend.” For that reason she expects Thursday’s prices to rise chiefly because of the Nymex strength Wednesday, but added that “almost certainly the market will be soft for the weekend.”
“I can’t complain; it could be hotter,” said a Texas-based marketer referring to highs currently throughout the 90s in the Lone Star State. She said some of her customers have argued that high gas prices shouldn’t be tied to crude oil markets, “but what else is there” to explain why gas numbers remain lofty in the face of comfortable storage levels and somewhat mild weather in several areas so far this summer. She said some people at her company are predicting that prices may go even higher after Aug. 3. Forecasts of below normal temperatures for nearly all the eastern U.S. next week likely will be followed by more normal August heat in the following week starting Aug. 2.
Markets in the West had conflicting influences: on the one hand PG&E was projecting that linepack would fall below its minimum target levels Thursday and Friday, but on the other hand Kern River was again reporting high linepack systemwide. One western trader said she thought PG&E’s linepack was threatening to run low because the utility and buyers on its system were too cheap to pay up for border supplies, and that in turn might be responsible for Kern River’s high linepack because gas not being taken into PG&E’s system was backing up into Kern River.
A Gulf Coast source said he’s just noted “some poking around for August [trading] so far.” But a marketer said she was seeing business getting done very early for August. “A lot of our gas is already committed, and we’re still getting calls for next-month business,” she said, adding that “usually it’s the suppliers calling early, but now it’s the buyers doing it,” nearly all wanting indexed deals.
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