Although the Northeast remains unusually mild, the market found enough cooling load in high temperatures due to reach the 90s and 100s across most of the the southern U.S. and Midcontinent, backed up by moderate warming trends in the Midwest, Rockies and Pacific Northwest, to record gains at most points Thursday. A continuing futures loss a day earlier appeared to have little impact on Thursday’s cash prices.
All of the losses ranging from 2-3 cents to about 20 cents occurred in the Rockies, Midcontinent and desert Southwest. The rest of the market was flat to about 20 cents higher.
The Energy Information Administration’s estimate of a 75 Bcf addition to storage in the week ending July 3 fell short of consensus expectations in the low to mid 80s Bcf. Even with working gas inventories already approaching maximums at several facilities, primarily in the Gulf Coast and Rockies, Nymex traders made a modestly bullish response to the report, pushing August futures 5.5 cents higher Thursday and breaking an extended losing streak in the process (see related report).
Despite PG&E declaring a systemwide high-inventory OFO (see Transportation Notes), Malin and the PG&E citygate saw small increases. However, a producer said the OFO, along with regional pipeline constraints, was backing up supplies in the Rockies and driving prices lower as a result.
El Paso reported that it was experiencing moderately high linepack Thursday. But Westcoast, which had been reporting high linepack in most or all of its system in recent months, said Thursday linepack had returned to normal in all segments but was expected to start increasing again, so “shippers are asked to continue trending their accounts towards zero.”
Although some locations in the Midwest will be reaching the high 80s Friday, the burst of air conditioning demand will be short-lived as an eastbound cold front will bring cooling rains to the region this weekend, according to The Weather Channel. Meanwhile, the “summer that wasn’t” will continue in the Northeast as highs remain limited to the 70s; Boston will get a little warmer Friday but still will just barely exceed the 70-degree mark, Weather Central said.
The South’s forecast was mixed; highs on either side of 100 would extend from Texas and Oklahoma through Little Rock, AR, and Memphis, TN, but then be reduced to either side of 90 eastward. Even New Orleans, a normal hot spot at this time of year, would only get to the low 90s Friday, Weather Central said.
Even with the Rockies and Pacific Northwest contributing a bit more cooling load than before, with Denver expected to hit about 90 Friday, the Rockies saw most of Thursday’s price declines and most of the overall market’s smallest gains were in the West.
A Rockies producer said 90-degree heat in Denver was somewhat deceptive because it wouldn’t result in the increases of air conditioning use that it might have in other areas. Regional pipeline constraints, combined with PG&E’s OFO backing up gas into the Rockies, were the chief cause of local price losses Thursday, he said. Heat in the southern U.S. was an important factor in raising quotes in most of the market, but until it spreads into the Northeast he remains bearish for the most part.
Henry Hub-CIG basis was around 89 cents Thursday, the producer continued. “We’ve seen a lot worse, so nobody here is complaining about a basis spread of less than a dollar,” he added.
However, he expressed worry about a major price breakdown as western storage rapidly approaches maximum levels. Questar’s Clay Basin facility is already at 40.1 Bcf, with total working gas capacity of 51.4 Bcf, he noted, adding that Clay Basin currently contains 14 Bcf more than it had at the end of July last year. It’s a big concern, he said; “we’re way ahead of where we’ve ever been before on storage.” He projects nearly all of western storage becoming full in early September, “just about when cooling load starts to disappear.”
The big market story right now is in Texas, the producer said, reporting that he had heard some baseload power plants there are down for maintenance and gas-fired peaking units are getting dispatched more often now.
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