After taking a breather Wednesday to consolidate early-week spikes, it was off to the races again for the cash market Thursday. Unlike on Monday and Tuesday when dollar-plus jumps were common, there were only a couple this time, but all of Thursday’s gains were solidly in double digits as they ranged from a little less than 30 cents to $1.20 or so. Price strength was fairly consistent across the various geographic market areas.
The spread of falling temperatures into the South and Northeast (the Midwest, Plains and most of the West were already pretty chilly) combined with major support from the screen’s 36.5-cent increase a day earlier to push cash quotes higher.
The physical market will have positive guidance again Friday from prompt-month futures, which posted a further advance of 32.5 cents Thursday. Cash-screen convergence was on the move again, with Henry Hub’s gain of about 70 cents narrowing its deficit to the November contract to around 36 cents.
The Energy Information Administration surprised nobody in estimating a 53 Bcf storage build in the week ending Oct. 13, although the number was slightly above consensus expectations. Total inventory in the Lower 48 states stood at 3,389 Bcf as of last Friday, EIA said.
It may seem contradictory to have such bullishness in the market when so many storage facilities are already 95% or more full, and a few are even exceeding their supposed capacity limits (see Daily GPI, Oct. 18). But apparently quite a few buyers want to preserve their storage gas in case of a severe winter. A utility buyer in the South at least partially confirmed this tendency. His company had been pulling from storage during last week’s cold spell, he said, but now it’s making swing purchases again in an effort to ensure that its storage accounts are full when November arrives. These new forecasts of a colder than normal winter (see Daily GPI, Oct. 19) are making the company more cautious, he said.
The buyer said his area recorded a high of 86 degrees Wednesday, but was looking at a low of 42 Thursday night. “That’s quite a swing in temperatures,” he observed.
Malin and the PG&E citygate returned to defying conventional market wisdom by achieving gains of well over half a dollar despite PG&E extending a systemwide high-inventory OFO into a third consecutive day Friday; however, the utility did loosen the tolerance for positive imbalances.
Northern Natural Gas provided a clue about how heavy Midwestern heating load was getting. Saying its normal system weighted temperature is 48 degrees at this time of year, Northern projected weighted temperatures of 36 Thursday, 41 Friday, 34 Saturday and 34 again Sunday.
Although most of the current market strength is based on growing heating load, cooling load hasn’t disappeared entirely. Florida Gas Transmission cited predictions of 90-degree weather in Florida as it declared an Overage Alert Day Thursday (see Transportation Notes), and highs will reach the mid 80s Friday in much of the desert Southwest and inland California. Florida Gas Zone 3 and the Florida citygate saw the only price spikes in triple digits.
A Northeast marketer said he expects further volatility and price increases Friday due to continuing cold weather in most of North America and the screen maintaining its support for cash numbers. There was “good buying interest all around” Thursday, he said. However, he thought this market was rather “intriguing” for its ability to skyrocket in the midst of a shoulder month and record-setting storage levels.
A western trader also was rather puzzled about the recurring price strength. “Actually, I’ve got more questions than answers for you today,” he told NGI.
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