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Heating Load Spurs Further Price Gains
Only a couple of points saw losses Tuesday as the cash market continued a broad overall advance. Cold to chilly forecasts for Wednesday — with freezing lows due in some locations — stretched from Western Canada and much of the western U.S. through the Plains and Midwest into the Northeast. Cash got an extra boost from Monday’s May futures increase of 6.7 cents, and there likely was a small amount of run-up in cooling load in the South, where highs from the mid 70s to mid 80s were predicted for much of the region.
A large majority of points were flat to about a quarter higher, with Northeast citygates racking up most of the double-digit upticks.
Florida Gas Transmission extended an Overage Alert Day (OAD) into its second day even though market-area highs have receded into the mid 80s. However, the Florida citygate had the only sizeable decline of nearly a dime, while Niagara was barely lower by about a couple of pennies.
Cash traders will have to get by Wednesday on essentially neutral guidance from Nymex as prompt-month futures barely budged with a loss of 1 cent (see related story).
Currently, Florida, parts of the desert Southwest, and the south-central states of Oklahoma, Louisiana and Texas constitute the only areas with peak temperatures around 80 or higher experiencing any appreciable cooling load, but the rest of the South is gradually playing catch-up on the thermometer. Otherwise, cold weather isn’t nearly as intense currently as what lasted through last winter into March, but the chill factors are virtually certain to have quite a few furnaces running.
The CIG-Henry Hub basis spread, which had widened to about 65 cents at the start of last week, was trimmed to about 18 cents Tuesday. IntercontinentalExchange (ICE) said hub prices rose less than a nickel even though volumes traded there on its online platform took a tremendous leap from 927,200 MMBtu Monday to 1,444,000 MMBtu Tuesday. Meanwhile, CIG quotes were up nearly a dime and its ICE activity, while relatively minor compared to Henry Hub’s, more than doubled from 23,800 MMBtu to 54,300 MMBtu.
Lows in much of the Rockies will continue dipping to around freezing or below. Kern River said its projected low of 23 Tuesday in Opal, WY, where the Williams Field Services-operated Opal Plant is the source for a great deal of its supply, would be 24 Wednesday before sliding to 18 Thursday. Even Denver will see the thermometer slipping to the mid 20s by Thursday, Kern River said.
A western trader noted that many regional prices had gone up between about a nickel and a dime due to the chill but said conditions should be getting noticeably warmer by the weekend. The California market apparently is seeing slightly higher heating loads than usual for this time of year, he added. The trader said a station maintenance outage on Transwestern is limiting Southern California border deliveries to some extent but the market didn’t seem to be missing the supply.
The bullish nature of Monday and Tuesday’s pricing likely was related to rising nominated volumes Tuesday at most of the 23 trading points covered by Bentek Energy’s U.S. Natural Gas Hub Flows chart. Only six of the locations recorded declines, and a couple of those were fairly negligible at only 2,000 MMBtu each while the only major drop was by 251,000 MMBtu, or 7%, at the Florida citygate. The other 17 points were flat to 459,000 MMBtu higher, with Columbia Gas in Appalachia claiming the top gain (up 15%). Other large increases, Bentek said, were Texas Eastern M-3, up 404,000 MMBtu (16%); Malin, up 176,000 MMBtu (12%); Transco Zone 4, up 159,000 MMBtu (7%); Sumas, up 142,000 MMBtu (20%); and Transco Zone 6, up 116,000 MMBtu (9%).
With the traditional storage injection season still in its beginning stages, Southern reports inventories at its two facilities already having surpassed the halfway-full mark. As of last Thursday the fields contained 32.1 Bcf of working gas, or 54% of their total capacity of 60.0 Bcf, the pipeline said. That was actually behind the refill pace two years ago, when 36.1 Bcf (60%) had been stashed away as of April 9, 2009. But it is ahead of the April 8, 2010 level of 27.6 Bcf (46%).
IAF Advisors analyst Kyle Cooper expects a storage injection of 41 Bcf to be reported for the week ending April 8. Stephen Smith of Stephen Smith Energy Associates looks for a significantly lower build of 34 Bcf, which he said was up from his original estimate of 32 Bcf. And the projection by Credit Suisse’s Hugh Li and Stefan Revielle is 37 Bcf. That would compare to 79 Bcf a year ago and a five-year average injection of 27 Bcf, Li and Revielle said, adding that the slow start to the injection season has allowed the year-on-year deficit to widen, “which should keep prices supported in the near term.”
Meanwhile, Citi Futures Perspective’s Tim Evans has one of the highest estimates, a 44 Bcf build in the upcoming report Thursday, which he expects to be followed by injections of 66 Bcf, 56 Bcf and 84 Bcf in the weeks ending April 15, April 22 and April 29, respectively.
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