Cash prices overall advanced on average of about 9 cents Thursday, and futures settled at the highest point since December 2011. Particular strength was noted in the Midwest and eastern prices rose as cooler temperatures were forecast. California and West Coast prices firmed following repairs to a compressor station.

The Energy Information Administration reported that 72 Bcf was injected into underground storage, less than what traders were expecting, and prices advanced. At the close of futures trading, November had added 12.9 cents to $3.604 and December had risen 11.7 cents to $3.900. November crude oil gained 82 cents to $92.07/bbl.

Midwest generators expounded on the current debate over coal-to-gas switching. Coal-fired generation and natural gas-fired generation may not be as closely linked as some analysts have intimated. This could have strong implications as to whether the rise in natural gas prices is indeed capped by the price of coal.

“I don’t think it’s that directly linked,” said a Wisconsin utility manager. “It’s really just a function of what’s the input price and what is the market bearing. The market price [power] is really what drives whether the unit is running or not. Each unit needs a certain cash flow.

“Three to four years ago if you look at our runs, we ran [gas-fired generation] during the summer and winter peaks and had very few other runs. The last two years we ran many more months outside that typical winter summer, but even this month it didn’t always run because loads are probably at their lowest of the year.”

The switching from or to natural gas just naturally happens. “We project LMP [locational marginal prices] for the next three months, and if you mothball a coal plant, it depends on what your projection is. With our gas plant it is a little easier because you can shut it off every day, whereas with a coal unit you can’t do that. With a coal unit you have to make a conscious decision whether you are going to run it for the next month to two to three months. With a gas plant if it’s in the money, let’s go,” the manager said.

The manager admitted that with his projections for LMP, not all units would be profitable. “If you look at the second half of September, October, November time frame, we believe that half our fleet of coal units is in the money, and half is out. With gas we really don’t think twice because there is a spot price every day that will allow us to make a decision every day.

“We try to figure out what it’s going to cost to run the plants. You have your must-take coal contracts, so maybe it is cheaper to sit the unit down and take the penalty rather than run it. That’s what it comes down to for us,” he said.

Next-day power prices were generally lower. IntercontinentalExchange reported that power at PJM West for Friday delivery declined 87 cents to $37.13/MWh. Day-ahead locational marginal price (DA LMP) at the New England Power Pool added $1.80 to $37.70/MWh, and DA LMP at California delivery point SP-15 shed $2.00 to $35.41/MWh.

Next-day gas prices at Midwest locations, however, rose. Friday deliveries to Chicago Citygate gained 4 cents to $3.47, and gas into Dawn rose 16 cents to $3.72. Next-day gas at Consumers rose 7 cents to $3.51, and deliveries to Michcon fetched 10 cents more at $3.52. On Alliance Friday gas added 6 cents to $3.48.

Next-day prices at West Coast points scored double-digit gains as compressor problems limiting flows were rectified. SoCal Gas on its ENVOY website reported 320 MMcf/d of injection capacity at its Aliso Canyon facility were returned to service.

At Malin Friday deliveries rose 14 cents to $3.51, and at the PG&E Citygates next-day quotes gained 7 cents to $4.00. SoCal Citygate prices for next-day delivery surged 14 cents to $3.67, and at the SoCal Border prices jumped 13 cents to $3.54. On El Paso S Mainline gas for delivery Friday added a stout 14 cents to $3.56.

Eastern prices rose as cooler temperatures were forecast. predicted that the high in Philadelphia Friday would reach 59, well below the seasonal norm of 65.

Quotes on Tetco M-3 for Friday delivery added 7 cents to average $3.51, and parcels into Dominion gained 4 cents to $3.31. Deliveries on Transco Zone 6 New York were quoted 6 cents higher at $3.52.

Futures traders noted that the market was able to build on earlier gains posted when prices jumped following the release of supportive storage stats. After adding 8 cents on the storage report “we rallied in the last five minutes which is a good sign,” observed a New York floor trader. “We might see a little setback Friday only because prices have been straight up this week and there might be some profit-taking.”

Will storage end the season above the 4.0 Tcf mark? It’s going to be close. At present natural gas inventories stand at 3,725 Bcf, and with three weeks left in the traditional injection season it will take builds of 92 Bcf a week to make it. The kicker is that injections will often continue into November making the 4.0 Tcf mark actually feasible.

Prior to the release of the 10:30 a.m. storage report, all indications were that this week’s build report would fall a little short. Most estimates were close to last week’s reported 77 Bcf increase, and United ICAP calculated a gain of 73 Bcf. Ritterbusch and Associates was looking for a build of 77 Bcf, and Bentek Energy calculated a gain of 76 Bcf. Last year 108 Bcf was injected, and the five-year average is for a build of 84 Bcf.

Analysts at Energy Metro Desk (EMD) figured that “if weekly injections through early mid-November match the five-year average, the end tally will be in the 3.960 Tcf neighborhood, or almost 3% above last year’s record high of 3.852 Tcf but 6.7% below the newly expanded 4.239 Tcf capacity estimate EIA announced last month.” Either way it is a boatload of gas.

EMD‘s final weekly survey estimated a build of 78 Bcf from a poll of 37 analysts. The range was from 70 Bcf to 98 Bcf.

Bentek said “The risk to this week’s forecast is to the high side. The colder temperatures predicted for this week did not arrive until the end of the period, suggesting that residential and commercial demand was overestimated and allowed for additional injections.”

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