The natural gas cash market on average slipped by a penny in Wednesday’s trading, with many points trading within just a few pennies of unchanged. Great Lakes locations were flat to a couple of pennies lower, and the Gulf mostly registered losses of 2-3 cents. California prices were squarely in the red. At the close of futures trading, July had added 5.3 cents to $3.777 and August was up by 5.4 cents to $3.797. July crude oil added a half buck to $95.88/bbl.
A Great Lakes marketer reported issues with Trunkline and Consumers. “It looks like Consumers wants to be sure they have firm delivery, and they are not happy with what they have to pay Trunkline, and it looks like a federal issue. We hope it doesn’t affect deliverability, but some Trunkline customers are concerned.”
The Michigan marketer added that up until now there hasn’t been a problem, but “there are just too many customers on Trunkline that they couldn’t allow customers to get their gas…We bought a small amount of gas on Consumers for Thursday at $4.045.”
Next-day prices in the area struggled to generate any kind of upward momentum as temperatures throughout the region were not expected to make it to seasonal norms by the end of the week. AccuWeather.com said Wednesday’s high of 77 in Detroit was expected to hold steady Thursday before falling slightly to 75 on Friday. The normal high in the Motor City is 78. Chicago’s high Wednesday of 85 was forecast to ease to 78 Thursday and 74 Friday. The seasonal high in Chicago is 79. To the north, Milwaukee’s 68 high reading Wednesday was anticipated to reach 72 Thursday before dropping to 67 Friday. The normal high in Milwaukee is 74.
Quotes on Alliance came in at $3.80, down a penny, and deliveries to the Chicago Citygates were seen flat at $3.81. Consumers’ next day deliveries were quoted at $4.01, unchanged from Tuesday, and on Michcon, gas for Thursday delivery was seen at $3.92, 2 cents lower. ANR ML7 came in at $3.75, 2 cents lower, and at Dawn, Thursday packages were traded at $4.07, 2 cents lower.
Gulf points were mostly lower. Quotes on ANR SE were up a penny at $3.69, and parcels to the Henry Hub fell 3 cents to $3.74. Transco Zone 3 gas was quoted at $3.75, down a penny, and on Texas Eastern E LA, gas changed hands at $3.72, 2 cents lower.
Prices on California pipelines eased. PG&E Citygate was seen at $3.82, 2 cents lower, and gas delivered to the SoCal Citygates fell 2 cents to $3.89. At the SoCal Border, Thursday gas was $3.73, 2 cents lower, and deliveries to El Paso S Mainline were down a penny at $3.77.
Traders will be watching the Department of Energy’s (DOE) Energy Information Administration (EIA) government storage figures to see if a repeat of last Thursday’s wide miss by analysts is in the cards. Last Thursday 111 Bcf was reported by the EIA, confounding analysts who were looking for a build closer to 95 Bcf. Expectations for the week ended June 7 are for an increase also in the mid-90s Bcf range. Industry consultant Bentek Energy calculates a build of 94 Bcf. A Reuters poll of 22 market observers showed an average 96 Bcf, with a range of 88 Bcf to 112 Bcf. United ICAP also came up with an estimated 96 Bcf. Last year 66 Bcf was injected and the five-year average stands at 84 Bcf.
Wednesday’s gains notwithstanding analysts, see the recent decline as a result of market mechanics and long liquidation rather than any new bearish news. “Natural gas futures extended their recent slide, with the bulls still clearly on the defensive and under pressure to trim long positions,” said Citi Futures Perspective’s Tim Evans in comments Tuesday to clients. “The decline occurred despite a weather forecast that looked slightly less bearish than a day ago. Consensus expectations for Thursday’s DOE storage report are still forming, but estimates we’ve seen suggest a 95 Bcf net injection is anticipated, moderately bearish compared to the 84 Bcf five-year injection for the date.”
Evans views “last week’s surprisingly high 111 Bcf build [as] largely a function of the Memorial Day holiday or other one-off swings rather than a weakening of the ongoing supply-demand balance. In contrast, the historical data suggests that the average impact of a holiday is modest, on the order of 3-5 Bcf for the week, and so our inclination is to allow our model to attribute the surprise to a weaker supply-demand balance that would tend to persist. On that basis, we see a gentler decline to 105 Bcf in net injections that would constitute a further bearish shock for those looking for 95 Bcf.”
WSI Corp. in its Wednesday six- to 10-day outlook sees “no major changes” from a previous forecast. “Confidence is slightly above average [Wednesday] as all models show good agreement with regards to the anticipated pattern evolution. Temperatures could run colder over the Northwest and Northeast as a series of upper-level disturbances impact both coasts.”
WSI sees a near-term cool regime in the East. Boston’s Thursday high of 67 is forecast to drop to 62 by Friday. A week from this Friday the high is expected to reach a more seasonal 79, 2 degrees above normal. New York City’s 72 degree high Thursday is expected to slide to 68 this Friday, but rebound to 79 next Friday. The seasonal high in New York this time of year is 76.
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