As expected, the combination of generally light weather-based demand, further futures softness a day earlier and the extra loss of load associated with a long holiday weekend resulted in lower prices at virtually all points Thursday. Forecasts of mid 90s to 100-degree highs in the south-central U.S. and a warming trend to either side of 80 in the Midwest failed to increase cooling load enough to support the cash market.
The Carthage Hub in East Texas near the Louisiana border made a small recovery from its steep maintenance-related losses earlier in the week, but it was the only point to avoid losses ranging from about a nickel to about 30 cents. The West and Northeast tended to see most of the larger declines.
In reporting a 70 Bcf storage addition in the week ending June 26, the Energy Information Administration (EIA) fell slightly short of consensus expectations in the mid 70s Bcf and was around the low end of the range of previous estimates. Although the build was moderately bullish in comparison with larger year-ago and five-year average injections (see related story), Nymex traders took a “ho-hum” attitude in driving August futures 18 cents lower Thursday.
Several pipes in both the East and West were warning or reminding shippers of their limited ability to accommodate positive imbalances during the expected light demand of the Independence Day weekend.
Heat was building to the 100 area again in most of Texas and the surrounding region going into the Fourth of July weekend. But the eastern end of the South was due to remain limited to highs around 90, and although warming trends were forecast for both the Midwest and Northeast, neither region was expected to add significant air conditioning demand to the existing market dynamic.
The desert Southwest, inland California and sections of the Pacific Northwest were predicted to remain warm to hot, with weekend highs in the Southwest likely to increase to as much as 117, according to The Weather Channel. However, a storm will be cooling off the Pacific Northwest early this week, it added.
Despite Thursday’s losses at nearly all points, a Gulf Coast trader said she had no trouble placing her company’s gas due to heat in the South. There’s not much weather load in the northern U.S. and Canada, though, she noted. The price softness was hardly surprising, she said, since the July Fourth weekend is just about the weakest demand period of the year in most areas. A lot of people will be out traveling, “so they won’t be running air conditioners at home,” she said.
A utility buyer in the South said he had no immediate-burn load, but still purchased some spot gas for the long weekend to make sure his company was meeting storage injection targets for the month. It expects to have its storage accounts 77% full by the end of July with three months left to go in the traditional injection season, he said.
It was nice to pick up gas at prices below first-of-month indexes, the buyer said. The utility’s service area has returned to close-to-normal temperatures for early July, he added.
A Rockies producer said he finds it “amusing” to hear people talk about summertime weather in Chicago impacting gas demand. Sure, Chicago and the Midwest in general constitute a major load center during the heating season, he said. According to EIA data, the whole state of Illinois uses less gas for power generation during the summer “than little Colorado does,” he said. Illinois has always been big in producing power from coal and nuclear plants, not natural gas, he noted.
“Temps in Texas are what counts!” the producer continued. One of the reasons that Texas is the largest gas-consuming state is that it generates nearly 50% of its power from gas-fired plants, more than twice the national average, he said. EIA data also shows that Texas uses three times as much gas for power production as New York and nearly twice as much as California, he observed.
Prior to the storage report’s issuance, the producer said the impact of last week’s Texas heat wave may cause the report “to be the first decent one in quite some time in spite of the mild temps in the Northeast.”
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