The swing market emerged from the holiday weekend in a decidedly mixed mood. In the East, prices ranged to 15 cents up or down from flat Tuesday, but showed a pronounced bias to the downside. Western points were considerably more bullish, registering moderate gains in most cases but rebounding about a dollar in San Juan Basin and rising 20 cents or more at a few Rockies points.
In addition to highly negative guidance from a morning screen that finished the day down more than 20 cents, near-term weather played a role in the overall eastern weakness. Temperatures in the Northeast and eastern portions of the Midwest don’t reflect the reality of late spring, failing to get above the 60s in high readings. And the South, although due for more seasonal heat later in the week, wasn’t living up to its potential for late-May air conditioning load as of Tuesday.
Meanwhile, the desert Southwest continues to bake in 100-degree-plus conditions, and will be joined to a lesser degree Wednesday by a high-pressure system bringing highs in the 80s and 90s to much of the interior West. One source said Denver was already up to 80 degrees Tuesday afternoon.
San Juan prices saw a huge rebound partly “because they went down so far Friday,” a marketer said, but more so because a major transportation constraint has ended after Transwestern finished maintenance on its San Juan Lateral Monday. He added that he would not be surprised if El Paso calls another Unauthorized Overpull Penalty this week, saying the pipeline is getting semi-overwhelmed by a lot of power generation demand in East-of-California markets.
Although the futures dive and falling cash quotes in late deals led a couple of sources to predict softening Wednesday, a western trader thinks current demand factors should “keep swing relatively strong” in his region for at least another day or two. However, he acknowleged that softness was more likely at eastern points.
Florida Gas Transmission shippers had a new Overage Alert Day notice (see Transportation Notes) to deal with Tuesday, but as a Florida utility buyer observed, “a 20% [imbalance] tolerance is not too bad.” She reported purchases identically priced in the mid $5.80s for FGT’s Zone 1 (Texas) and Gulfstream Mobile Bay (Alabama), but said the delivered price would be about the same in each case despite the Gulfstream gas being much closer to the market area.
Bidweek prices were coming down Tuesday, likely following the screen, a western buyer said. He reported San Juan-Blanco deals at “$5.00 flat” Tuesday compared to the mid $5.10s on Friday. “People are calling around asking me to buy. The screen dropped, which is going to affect everyone, of course. But the West looks a little weak on top of that. Weather is fairly mild in California, only about 85 degrees, so it has relatively little [air conditioning] load at this point. Texas is kind of hot, but we won’t feel any of that here until maybe later this week. By Thursday we should be upwards of 88 degrees with a little humidity to boot.”
A marketer said a lot of potential customers in the Midwest, especially asphalt companies, are still switched to fuel oil, “and I’m having to wait for them to come back” to gas. He was hearing basis of Nymex last-day plus 27-28 cents for Michigan citygates Tuesday but didn’t plan to begin June trading until Wednesday, “so basis may be shifted by then.” In something of an afterthought, he commented, “This whole thing about a potential supply crisis this winter has got me worried, and I’ve been in the industry since 1977.”
A Florida utility buyer quoted Nymex last-day basis purchases for June in FGT’s Zone 1 at minus 2 cents but in Zone 2 at plus 3 cents. He wasn’t sure why the premium was in effect for Zone 2, but speculated that “maybe some people are figuring on hurricane disruptions in June.” Also, he added, FGT’s market area will probably see more competition for Gulf Coast supplies with Northeast and Mid-Atlantic interests in downstream Zones 2 and 3.
Lehman Brothers analyst Thomas Driscoll forecasts a storage injection of 95 Bcf for the week ended May 23. This would leave inventory levels at 1,085 Bcf, 762 Bcf lower than last year and 499 Bcf below the five-year average, Driscoll said. Kyle Cooper of Citigroup, whose initial estimation Friday of this week’s EIA report called for an injection in the low 90s Bcf, said Tuesday his final estimation is a range of 86-96 Bcf.
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