Cash natural gas prices on average were unchanged Thursday with declines posted at Midwest points and gains at southern California and some eastern locations. The Energy Information Administration reported a build of 65 Bcf, somewhat less than what traders were expecting, but futures markets limped to an uninspired finish. At the close, December had gained 0.7 cent to $3.699 and January had shed 0.2 cent to $3.818. December crude oil gained 85 cents to $87.09/bbl.
Midwest utility buyers said they had procured most of their storage gas and had little interest for the moment in spot deals. “We are just coasting and not buying anything right now,” said a Midwest utility buyer. “We’ve got plenty of gas coming at us for November, so we are OK.” He added that during the winter his company would typically not hesitate to use storage gas “for any shortage we may have and not buy on the market. We’ll try to keep that down as much as possible.”
Early week strength in the Midwest, which sent Chicago Citygate prices close to $4, “was due to short selling,” he said. “It looked to me like people were short the whole month of October and were hoping prices would go down, and they didn’t. They were waiting for the prices to tank and they didn’t. They were still short and had to cover. We had some cold weather early in the month, which caused us to go negative on the pipe.”
There was little short-covering in evidence Thursday on Midwest pipelines. Quotes at Chicago Citygate fell 6 cents to $3.90, and deliveries on Alliance tumbled 15 cents to $3.83. Next-day gas on Michcon fell 7 cents to $3.89, and buyers on Consumers were able to pick up gas 8 cents less at $3.83. Quotes at Dawn tumbled 8 cents to $3.96.
At Northern California points prices eased slightly as loads softened. “We are seeing loads a little bit lower than normal, but they should tick up throughout the month,” a California utility buyer said. “We are seeing loads about 10% lower than normal, and it’s all because the weather has been so nice.”
Forecasters are calling for northern California temperatures to rise going into the weekend. AccuWeather.com forecast that Thursday’s high of 65 in San Francisco would rise to 66 on Friday before reaching 68 on Saturday and 73 on Monday. The normal high in San Francisco is 67 at this time of year. Sacramento’s Thursday high of 70 was anticipated to ease to 69 on Friday before hitting 73 on Saturday and 76 on Monday. The normal high for Sacramento at this time of year is 71.
The National Weather Service in San Francisco said that by Friday a weak ridge would keep the current storm track to the north. “Over the weekend the upper ridge is forecast to strengthen over the west for a warming trend that will persist through the middle of next week.”
Quotes at Malin rose a penny to $3.56, and deliveries to PG&E Citygate slipped 2 cents to $3.91. At the SoCal Citygate next-day gas added 8 cents to $3.90, and deliveries to SoCal Border points gained 11 cents to $3.81. On El Paso S Mainline Friday deliveries jumped 16 cents to $3.90.
Next-day prices a eastern points were mixed. On Dominion next-day deliveries rose 6 cents to $3.58, and on Tetco M-3 Friday gas gained 2 cents to $3.69. Gas bound for Transco Zone 6 in New York fell 3 cents to $3.71.
The day’s lackluster futures trading has analysts seeing natural gas caught in a trading range but still having a shot at higher prices. “[We] see only one way to suggest a seasonal top is in place, get back below $3.461-3.401,” said Brian LaRose, a technical analyst with United ICAP. “As long as natgas can hold above this support zone, a push to the $4.320-4.399 area cannot and should not be dismissed. However, if natgas cannot hold above this narrow band of support, it will very much look like a seasonal top is in place. Protective sell stops below 3.391 are encouraged,” he said in closing comments to clients.
Traders and analysts got a somewhat better fix on just how full ending storage may get. With Thursday’s reported 65 Bcf storage injection, inventories surpassed last year’s 3,852 Bcf and swelled to 3,908 Bcf, a new record.
Going into the report there seemed to be little doubt a new record would be set. Last year at this time, 82 Bcf was injected, and the five-year average stands at 57 Bcf. Estimates were closely bunched. Analysts at Energy Metro Desk (EMD) calculated an increase for the week ended Oct. 26 of 68 Bcf, and a Reuters poll of 23 traders and analysts revealed a sample mean of 67 Bcf with a range of 59-76 Bcf. Bentek Energy was anticipating a build of 68 Bcf.
With fall shoulder season weather at hand, the bigger question is most likely what will final ending inventories be. A survey by EMD showed an average 3,998 Bcf with a maximum of 4,174 Bcf. That question becomes important if the industry wants to avoid a price meltdown similar to last year when abundant supplies collided with a winter that never showed up.
If forecasts of heating requirements in key energy markets are any indication, the early returns aren’t looking all that encouraging. The National Weather Service forecast that for the week ended Nov. 3, New England is expected to see 95 heating degree days (HDD), or 76 fewer than last year. The Mid-Atlantic states of New York, New Jersey and Pennsylvania are forecast to endure 108 HDD, or 47 fewer than last year. The Midwest from Ohio to Wisconsin is predicted to shiver under 156 HDD, or 21 more than last year.
No significant weather changes are expected in the 11- to 15-day period. WSI Corp. of Andover, MA, said. “There are no major changes from yesterday’s outlook. [Thursday’s] forecast is a bit cooler across Texas than the previous one.”
There were still repercussions from Hurricane Sandy’s ravaging of the Mid-Atlantic and Northeast. Williams has extensive natural gas infrastructure in the Northeast, including the Transcontinental Gas Pipe Line (Transco) and midstream facilities. Williams Vice President Frank J. Ferazzi said Thursday the company lost “purchased power in many of our compressor stations in New York and New Jersey, and parts of Pennsylvania.
“But at those stations, we have backup generation capability that’s powered by natural gas, so there’s no disruption to flows.”
Williams also has a liquefied natural gas facility “that’s located close to the water,” Ferazzi told analysts during a conference call. “And so we anticipated that we may get some minor flooding, and that did, in fact, happen. So in anticipation of that, we took the facility down on Sunday.
“We did, in fact, get some water. But once the facility dried down, and we pumped a couple of feet of water away, we’re not expecting any permanent damage there. No leaks on the system, no other disruptions in flow…So I think on balance, we fared remarkably well. We’re going to have to remove some trees from the right of way, some fences were blown down. But again, no permanent damage to the facilities and no disruption in flow.”
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