Following Monday’s strong launch, this week’s northern heat-inspired bull market appeared to be running out of steam quickly Tuesday when a moderate bias to the downside dominated an overall leveling off of cash prices. Several scattered small gains were outweighed by flat showings and losses ranging up to nearly 20 cents.
“Is this uptrend ending so soon?” asked a Midwest utility buyer. During Monday’s trading the price advances looked poised to continue on Tuesday, she said, so it was a bit surprising to see the firmness fading a day later. And with the Nymex setback Tuesday (the natural gas screen dropped 16.6 cents while crude oil and heating oil futures also softened), “it’s kind of doubtful whether cash can head upward again this week,” the buyer said. The Midwest is hot now but is predicted to be getting back down to the mid 70s at the end of the week, she continued, which should push prices lower. “At least we hope it does; gas is overpriced as it is.” Be that as it may, the utility trader said she was aware of several area gas-fired power plants that are running now but were idle last week.
With reports from a Northeast source that rains would also be ending that region’s belated taste of summer heat by the weekend, a clue emerged on the fleeting nature of Monday’s mostly large upticks. Traders have often said that the key to a heat wave’s ability to push gas prices higher is being “sustained” rather than producing high temperatures for just a few days. It seems that the forecasts of weekend cooldowns for the Midwest and Northeast mean this burst of heat-related bullishness is failing the sustainability test, a source pointed out. He also mentioned that general expectations of a 110-120 Bcf injection in Thursday’s EIA report would represent the latest in a string of triple-digit weekly storage refills, which contribute to bearish feelings.
It’s “finally” very hot, commented a New England utility buyer, who said she went from having the furnace on Sunday to running the air conditioner Tuesday. The Northeast sort of moved from winter to summer without much spring in between, she added. There were quite a few requests for intraday gas, and the buyer said she was able to make an intraday sale at the Algonquin citygate for $7, about 40 cents above her next-day citygate purchase. “Not that many people can handle intraday supplies, so there’s almost always a premium because of the extra work involved,” she said. Another complication is that a power generator often can’t be sure of needing intraday gas until after cash trading is completed. Mid to late afternoon peaks in electric usage can’t always be estimated accurately in the morning, she said.
As of Tuesday hot weather was the rule for most of the U.S., with cooler temperatures lingering only from coastal California through the Pacific Northwest and into the Upper Plains (a winter storm alert was posted for parts of Wyoming Tuesday morning, according to The Weather Channel). But the cold front in the Upper Plains is expected to be invading the western Midwest by Thursday.
Florida Gas Transmission posted a second straight advisory of a “potential” Overage Alert Day notice, but at least one utility buyer in Florida continued to downplay its chances. “We just didn’t have enough load to justify new purchases” Tuesday, he said.
Tuesday marked the official start of NGI‘s bidweek survey period, and it was the expected slow starter. However, an eastern LDC staffer said most of her company’s July business was already completed, adding that she has the sense that “next-month trading gets started earlier than it used to.”
“Finally, some sun” was the heading on a Weather 2000 advisory issued Tuesday. The New York City consulting firm, which consistently led its competition in forecasting a colder than normal winter and a cool spring, continued: “As if a long overdue gift from the heavens, several big cities in the eastern half of the nation finally have a taste of some sun and summer temperatures, with a few (still far behind pace) 90s possible this week. Yesterday [Monday] hit 88 in Chicago, 84 in Cincinnati and 88 in New York City, a wonderful reprieve from the dismal weather the previous eight weeks. New York’s and Cincinnati’s temperatures were actually the first day [in] all May or June over 83 for both locales. In fact, prior to yesterday, 50% (11 days) of June in New York had high temperature that were below 70 degrees, helped in large part [by] the most rainfall ever for the month of June, and also yielding the most HDDs(!) [heating degree days] in June in over 75 years…
“Over the approximate 20-week summer season, this current week will be the first of possibly just a few warm weeks in 2003. This late-June warmth will do little to alter the monthly verifications, as we’ll be lucky to find any hubs over the entire central and eastern U.S. (other than perhaps a Houston or New Orleans or southern Florida) that will register a warm June 2003. All measuring criteria (frequency of cool vs. warm days, CDDs [cooling degree days] and [number] of extreme max temps), will be below normal for yet another month, with bleak prospects for July shaping up any differently.
“Warmth this week will be short-lived, as cooler air yet again pervades the Midwest and spreads eastward…especially in the 3-5 day period, negative anomalies once again become the theme. Following a fluctuating period to close out the month, a more consistent western-third dry/warm pattern should re-establish itself in July, with LA Basin and Southern California temperatures displaying much more (anomalous) warmth in the July-September period (their real summer) than it displayed in the May-June period.”
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