With air conditioning load staying on the relatively light side outside the desert Southwest, a 33.9-cent screen drop on Wednesday providing highly negative guidance, continued concerns over storage injection space dwindling quickly, and excess supply issues in the West, it was hardly surprising when the cash market experienced double-digit drops across the board Thursday.
The lack of Atlantic tropical storm activity since Alberto kicked off the 2006 season last month was another contributor to growing bearishness among cash traders. Several analysts have commented recently that the further into the summer the industry gets without any hurricane disruptions of supply and without any serious, widespread heat waves to help soak up a glut of inventory, the more likely it is that prices are headed for an eventual major plunge.
Tropical waves parading across the Atlantic currently are being inhibited by a strong African dust layer stretching from Africa to the Caribbean, according to the Weather 2000 consulting firm.
As on the day before, the Gulf Coast and Northeast tended to see most of the largest declines, which ranged from about 20 cents to nearly 70 cents. Unlike the day before, the Midcontinent and West were unable to continue their rebound from holiday weekend softness and joined in the overall price drops Thursday.
Too much supply and not enough places for it to go helped depress prices in the West. Late in the day SoCalGas issued a high-linepack OFO (see Transportation Notes). Kern River reported high linepack in all four segments. And in a related note, Southwest Gas declared Thursday a “hold to burn notice due to high linepack on pipelines upstream of Southwest’s system,” effective until further notice, according to a posting on the Kern River bulletin board. The Las Vegas-based LDC said it was not allowing due-Southwest imbalance paybacks and asked customers “to ensure actual takes meet or exceed scheduled supply, assisting to reduce linepack to an acceptable level.” An OFO could be invoked if current conditions persist, Southwest said.
In addition, more supplies may be coming into western markets soon. Northwest not only said that starting Friday it will not accept requests for interruptible storage injections into its Jackson Prairie Storage Facility, but also that all Jackson Prairie interruptible customers who have a balance in the facility must bring their balances to zero by July 14 (see Transportation Notes).
Northwest’s bulletin board said that as of Wednesday, total Jackson Prairie inventory was 20,027,381 dekatherms — only 2,421,733 dekatherms less than the facility’s total working gas capacity. That means 89.2% of the capacity had been filled Wednesday.
In the second day of an Overage Alert Day by Florida Gas Transmission, Florida citygate volumes were up a very strong 242,000 MMBtu/d from Wednesday in nominations for Thursday, according to hub flow analysis by Bentek Energy (https://intelligencepress.com/features/bentek/). However, a plunge of almost 70 cents Thursday at Florida Gas Zone 3 may be a signal that citygate volumes will be backing off again Friday.
A continuing lack of significant weather-based load, further screen weakness Thursday and the weekend factor should have prices moving lower again Friday, a Houston-based marketer said. But paybacks likely will make Friday’s declines smaller than those on Thursday, he said, explaining that some traders like to go a little short during the week and then repay their imbalances over the weekend when overall demand is lower.
Despite the point falling about 35 cents, demand at Northern Natural-demarc was pretty strong “because it’s hot in Minneapolis,” the marketer continued. The city is expected to see a high around 90 Friday. He speculated that such heat is probably more oppressive to citizens of Minneapolis because undoubtedly they have a lot less air conditioning than a city like Houston. Its price may have been weak, but demarc volumes Thursday were up 77,000 MMBtu/d, or 7%, from the day before, Bentek said.
Helping to illustrate how moderate Texas weather has been so far in comparison with most summers, the Houston Ship Channel fell a little more than 35 cents to average just below $5. NGI had to go back to the trade date of Nov. 24, 2004 to find the last time the Ship Channel averaged less than $5; of course, that was in trading for the normally weak-priced four-day Thanksgiving weekend. Houston temperatures were due to start rising slightly Friday, but still were not expected to get above the low 90s through Monday.
There may be enough heat next week in key market areas to allow a rally by what currently looks like a very weak cash market. The National Weather Service (NWS) forecast for the July 11-15 period calls for above normal temperatures north and east of a line running westward from central Virginia through northern Kentucky, then curves slightly to the southwest to include all but the southeast corner of Missouri, the northwest half of Oklahoma and the Texas Panhandle before curving again to the north through southwest Colorado, western Wyoming and central Montana. The greatest deviations from normal in that area, NWS said, will occur in the heavily populated Northeast and Upper Midwest. It expects below normal readings in the South as far west as southeast Texas and as far north as northern South Carolina and the northern borders of Alabama and Mississippi, and also in the western two-thirds of Washington state along with the northwest corner of Oregon.
SunTrust Robinson Humphrey/The Gerdes Group is looking for a 72 Bcf storage injection to be reported for the week ending June 30.
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