The cash market succumbed to a growing dearth of cooling load in the Midwest, Northeast and Canada by dropping at most points Tuesday. It also felt negative pressure from the previous day’s 16.1-cent decline by August futures.
All of the flat to a little more than a dime higher quotes were in the Rockies, where temperatures are running above normal for this time of year with highs from the mid 80s to low 90s. Otherwise a large majority of the losses ranging from a couple of pennies to a little more than 60 cents were in double digits.
Traders of physical gas will continue to have negative guidance Wednesday from August futures after the contract fell another 10.9 cents Tuesday (see related story).
Forecasts of Wednesday highs in the 90s and 100s across the southern tier of United States extended into interior California and parts of the Midcontinent and Rockies. But they were unable to sustain the overall price increases that launched this week’s spot market Wednesday. Some major markets in the Midwest such as Chicago will fail to reach 70 degrees Wednesday, according to Madison, WI-based Weather Central, while other locations in that region will peak in the mild mid 70s. And after much of the Northeast topped out in the 80s as the week began, it will see high temperatures receding into the 70s Wednesday, Weather Central said.
The desert Southwest and inland California will continue to see torrid peaks around 100 or higher, while the Rockies will remain warmer than normal and the Pacific Northwest is forecast to see a warming trend that will take the high in Portland, OR, to nearly 90 Wednesday. Otherwise the California coast and most of Canada will be mild to cool.
Although PG&E is ending a systemwide low-inventory OFO Wednesday, there were still supply shortfall issues in the West. Kern River said linepack was low in the two farthest downstream of its four segments. On the other hand, though, Westcoast said it was experiencing high linepack due to returning volumes after a maintenance constraint at the Fort Nelson Gas Plant.
Sources said the current lightness of weather-based demand in northern market areas, coupled with significant pipeline maintenance constraints in the Gulf Coast during early July, make it difficult to assess the initial market impact from Rockies Express (REX) implementing service Monday in its REX-East segment through Ohio’s Lebanon Hub (see Daily GPI, June 30). However, a couple agreed that a softer Chicago citygate is the most likely result from the early days of REX-East operation.
A Houston-based marketer said it appeared to him that REX-East was pushing Chicago prices lower, but that also was being influenced at this point by the area’s cool temperatures. “It’s a little early to judge” due to little weather-based load, he said. Also, there are a “lot of moving pieces” involved due to the activation of new connects with Midwestern, NGPL, Panhandle Eastern and Trunkline, he said.
The marketer said he was seeing Chicago citygate basis at minus 20-22 cents during most of bidweek. He estimated the first-of-month Chicago index at $3.55-56.
Bentek Energy’s Sam Duran said REX-East throughput began slowly with a little more than 80 MMcf/d Monday, but the volume was jumping to about 720 MMcf/d Tuesday. Very little gas is making it to Lebanon yet, but that should change soon as the Texas Eastern interconnect at Lebanon becomes more active, he said. Most of the first REX-East deliveries so far are going to NGPL in Moultrie County, IL, and Midwestern in Edgar County, IL, along with a small amount to Dominion, Duran said. After Lebanon deliveries heat up, that should have a negative effect on Columbia Gas and Dominion prices, he added.
Justin Carlson, also of Bentek, said significant Gulf Coast pipeline maintenance during the first couple of weeks in July will blunt the early market impact of REX-East service. An outage of TGT’s Fayetteville Lateral for the first 10 days of the month will cut drastically into that pipeline’s Ohio Valley deliveries, Carlson said, which means REX-East has less competition in that market area at first.
A Midwest marketer also said Chicago has almost no weather-based load right now, but he thought more gas was being left there as a result of REX-East displacing some demand farther to the East. Noting unusual heat in the region last week, he said the Midwest is “definitely milder” now.
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