Prices were up across the board Thursday, with a solid majority of gains in double digits. Hotter weather trends in the Midwest and South were due to push highs into the 80s and 90s across most of both regions Friday, causing them to join the already sizzling West as sources of rising power generation load.
Upticks ranged from about a nickel to about 35 cents. The Northeast, California, Rockies and Southwest basin markets recorded most of the larger advances of 20 cents or greater.
It’s likely that a bearish storage report, a screen drop of a little more than a nickel, and the loss of industrial demand over a weekend will allow eastern prices to soften a bit Friday. However, the continuation of torrid heat across most of the West outside the Pacific Northwest may continue to put a floor under quotes in that region. The mountain city of Denver is forecast to expect another day of highs in the mid 90s Friday, and highs of 100-120 degrees will again bake the desert Southwest.
The Energy Information Administration surpassed nearly all prior expectations in announcing a storage injection of 94 Bcf for the week ending July 8. Although the volume fell slightly short in comparison with year-ago and five-year average levels, the report was undeniably bearish. However, a couple of cash market sources were a bit surprised when Nymex traders took August natural gas futures only 5.6 cents lower in the face of a $2-plus plunge by the crude oil contract. News reports said signs of decreasing global demand and a rise in U.S. petroleum inventories last week were somewhat allaying supply concerns at Nymex.
Minerals Management Service said Hurricane Dennis-related shut-ins continued to shrink rapidly, reporting only 268.29 MMcf/d still offline as of midday Thursday. The agency also said no evacuated platforms or drilling rigs remained (see related story).
Emily was upgraded to a dangerous Category Three hurricane Thursday while passing between Puerto Rico and Venezuela. Maximum sustained winds were continuing to increase and were near 115 mph late that afternoon (the Saffir-Simpson scale says 111 mph is the lower threshold for Category Three storm), according to the National Hurricane Center. At 5 p.m. AST Emily’s center was about 445 miles south of Santo Domingo, Dominican Republic, and was moving toward the west-northwest at almost 21 mph. Hurricane force winds extended up to 25 miles outward.
Emily’s projected course would have it traversing the northern end of Mexico’s Yucatan Peninsula by Monday morning.
“It’s kind of hot around here,” said the buyer for a Lower Midwest gas distributor. Her company is selling a lot of gas to electric generators, but since it’s able to cover most of the sales out of monthly baseload, she hasn’t been very active in the daily market lately. “But if the weather stays this hot, we’ll probably have to start buying more” spot gas pretty soon, she said. The buyer counted herself among those who thought the screen would soften more than it did after the storage report. Maybe the report will cause cash prices to fall Friday, she said.
A hint of softer Friday prices came from a Gulf Coast producer who said Thursday’s late quotes were dropping a bit after the EIA report came out. He reported seeing fairly normal basis spreads of 55-60 cents from the Gulf Coast to the market area, adding, “It’s more of a commodity market now than one of playing basis spreads.” Quite humid conditions and temperature peaks in the mid to high 80s Friday were creating strong power prices in Northeast, but the producer said he wasn’t seeing any significant increases in cooling load. As far as he could tell, most of the gas-fired peaking generation units are being kept in reserve for now.
With Thursday’s announcement by Inter Pipeline Fund that its 100%-owned Empress II facility is fully operational again (see related story), essentially all of the Empress, AB processing capacity that was knocked out by storms last month (see Daily GPI, June 24) has been restored. Because the Empress I plant was down for maintenance already when the storms struck, it is not counted as a storm victim. Empress I remains offline as the maintenance continues.
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