Wednesday’s price movement was mixed but biased to the downside. Continued substantive heating load kept most points firmer in the Gulf Coast and Northeast, but a string of futures losses coupled with already generally mild weather in the West and the approach of warmer conditions in the Midcontinent/Midwest had numbers mostly falling in those regions.
Although no 1-cent quotes resurfaced in the Rockies (Wednesday’s lowest quote was a quarter at Opal), the region was way out in front of losses ranging from 2-3 cents to about $1.20. Kern River, which had one of Tuesday’s penny prices, managed to rise about 30 cents Wednesday, but Northwest-domestic averaged less than a dollar. And only Cheyenne Hub and Kern River among the other Rockies points averaged more than $1.25.
Thursday lows in the 20s and 30s in the Northeast and Southeast, with some frost advisories in the South, kept this week’s overall firmness going for at least one more day in the Gulf Coast and Northeast. They had the lion’s share of prices that were flat to up about 40 cents.
Slight warming trends were due Thursday in the Midcontinent and Midwest, and the West is already enjoying mostly moderate weather outside freezing lows in the mountainous areas.
December futures extended their negative prior-day guidance for the cash market to four consecutive sessions Wednesday, falling another 23.9 cents to $7.624. Some cash-screen convergence was achieved as Henry Hub increased by nearly the same amount, closing the gap to about 20 cents or so.
The West (except for Kern River in the Rockies) was solidly softer despite two modestly bullish price developments. Acting somewhat out of character after rising 24 cents Tuesday with a PG&E OFO issued for Wednesday, the PG&E citygate fell about 20 cents Wednesday even though the OFO had been lifted.
More importantly to Rockies producers, though, was the reopening of full system capacity Wednesday on Cheyenne Plains (see Transportation Notes), restoring an important outlet for eastbound shipments. The pipeline had been limited to 590 MMcf/d in recent weeks during a ramp-up of capacity following a mid-September compressor station fire, but with no problems being found in an emergency shutdown test Tuesday, Cheyenne Plains can now accommodate more than 800 MMcf/d again. Pre-fire flows had been about 780 MMcf/d.
Normally Florida Gas Transmission (FGT) issues Overage Alert Days (OAD) because of high temperatures in its Florida market area. But it warned market-area customers of a potential OAD because of 30-degree weather being forecasted in northern Florida Wednesday night and Thursday morning. Florida Gas Zone 3 and the Florida citygate were up about 20 cents and a little more than 35 cents, respectively.
The recent firming trend in cash prices certainly slowed a lot Wednesday, a Gulf Coast producer observed, and he expects even eastern U.S. prices to start turning softer through the weekend with warmer temperatures on the horizon. If the prices keep coming down for a while, he said he thinks utilities may start doing more fixed-price deals again instead of showing their preference for mostly indexing or basis trading in recent months.
The producer doesn’t expect any substantial price strength for a while, though, because there’s so much gas in storage. If major cold returns (and it’s not expected to do so anytime soon), he expects more people to respond by withdrawing from storage in lieu of buying more spot gas.
It’s still cold enough in the Upper Midwest to keep furnaces turned on, especially with freezing overnight lows, said a marketer in the area. However, she added, a warm-up will begin this weekend and continue through next week. With the Midcontinent/Midwest market already starting to soften Wednesday, it stands to reason that prices will keep going down as heating load dwindles, she said.
The marketer noted that Consumers Energy in Michigan had ended curtailments on citygate deliveries effective with Tuesday flows, apparently because the current cold weather meant it needed the gas. But the utility “is cautioning us that it’s a day-by-day thing” with the possibility of renewed restrictions if it gets too warm, she said.
George Hopley of Barclays Capital Research looks for a storage injection of 36 Bcf to be reported for the week ending Nov. 2. Strategic Energy & Economic Research’s Ron Denhardt said his forecast is 33 Bcf. The Reuters survey of 21 industry analysts revealed an average expectation of a 32 Bcf build. Estimates ranged from 24 Bcf to 47 Bcf, the news service said.
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