Monday’s 37.4-cent advance by October futures may have looked impressive, but it proved to be largely ineffective in sustaining cash market firmness. Mixed pricing Tuesday that stayed close to flat in many instances but leaned mostly to the downside dominated in non-Rockies markets. Meanwhile, the Rockies were beginning to recover from Monday’s price massacre with fairly substantial increases, but still were averaging less than a dollar.
A sizable majority of points ranged from flat to down as much as about 45 cents. The Midcontinent, which had led Monday’s overall charge higher with temperatures rising in its primary market area of the Midwest, were out in front of the move lower Tuesday with Midwest mercury readings due to stabilize somewhat Wednesday. San Juan Basin was almost alone in joining Rockies rebounds of up to about 85 cents (Katy and the Houston Ship Channel in East Texas eked out tiny gains).
Forecasts of Wednesday highs limited to the 70s in the Northeast and mostly the 80s in the South meant mid-September cooling load was subpar in both regions. Some cities in the Midwest were due to creep a little higher, but others would see almost no new extra heat (Chicago’s peak around 86 Tuesday was expected to be replaced by one of 87 Wednesday).
The West will remain moderate to cool in most sections Wednesday, with even inland California cooling off (Sacramento was expected to fall to a high of 74 Wednesday). That left the desert Southwest, as usual, as the primary bastion of major air conditioning use.
Monday’s cash trading was long past when it was announced late Monday afternoon that Cheyenne Plains Gas Pipeline would begin “free flow operations” that allowed restoration of limited gas movement on its system (see Daily GPI, Sept. 18). That allowed rallies at most Rockies points, although the Questar average continued to sink another dime or so and low-end quotes of 10-11 cents were received again Tuesday. The “free flow operations” likely will continue through October, Cheyenne Plains said.
Low-price records have been tumbling in the last week or so, and two more new marks were established Monday — Cheyenne Hub’s average of 3 cents and CIG’s high-end quote of a dime. The Cheyenne Hub’s record-setting average barely edged out those of CIG (nickel), Northwest-domestic (11 cents), Kern River and Opal (both 12 cents), and Northwest-South of Green River (21 cents), all on the same day. Before Monday the all-time low average had been set at 24 cents by Cheyenne Hub on the trade date of Sept. 10 and then tied twice the next day by Kern River and Northwest-South of Green River.
On the same day CIG recorded the all-time low peak quote, Cheyenne Hub and Northwest-South of Green River topped out at 14 cents and a quarter, respectively. The previously weakest peaks were both set at 30 cents by Northwest-South of Green River on the trade dates of Sept. 11 and 12.
In response to the recent basis blowouts in the Rockies, the head of EOG Resources said it is shutting in a net 50 MMcf/d of production in the region due to “absurdly low prices” (see related story).
Atlantic tropical activity remained muted. However, a tropical wave and upper-level trough were bringing locally heavy rain to Florida’s East Coast and the Bahamas Tuesday morning, The Weather Channel said. “There is some potential for this system to develop tropically after it moves west into the Gulf of Mexico, and it will be monitored closely,” the forecaster added. Florida Gas Zone 3 saw one of the Gulf Coast’s biggest drops of nearly 20 cents.
Although the National Hurricane Center had not classified the system as of late Tuesday afternoon, Shell said it had begun preliminary evacuations of offshore personnel not essential to producing and drilling operations, based on the potential development of what it called “Tropical Disturbance #50.” About 400 more will be evacuated Wednesday, Shell said, but as of Tuesday afternoon production had not been impacted.
A Midcontinent producer had an answer for the question of why a strong screen advance Monday didn’t give much support to Tuesday’s cash trading. The October contract fell from $6.50 overnight to $6.36 early Tuesday and weakened another 16 cents while the cash market was still active, he noted. That translated into falling cash quotes in late trading, and the eventual futures closeout at $6.568, while up from the morning, represented an 8.5 loss from the previous day’s settlement, he said. That’s a good recipe for more cash softness Wednesday, he said.
The producer was already looking ahead to October business. Chicago citygate basis was getting weaker, he said, falling to minus 16.5 cents Tuesday. He was seeing index-based Chicago offers at the NGI index plus a penny. MichCon basis was minus 4 cents Tuesday, 2 cents weaker than on Monday, the producer went on. However, suppliers did well to sell MichCon at index this week, he said, because the citygate was fetching index plus 0.75 cent Tuesday after trading at index plus 0.25 cent last week.
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