Just when it seemed that cash prices had nowhere to go but down for quite a while, the market achieved a rally Thursday — sort of. Actually it was only a partial rally, as quite a few instances of flat quotes were scattered among points that were mostly less than a dime up or down from flat.
Western points recorded most of the declines that ran from a couple of pennies to as much as nearly 15 cents. Gains ranged from a couple of pennies to about a dime.
Thursday’s small gains by much of the cash market essentially ignored the negative influence of a 41.1-cent screen plunge Wednesday. Apparently enough heat has resurfaced in the weather picture to drive rising power generation load and reintroduce a bit of firmness in the market.
Although much of the Northeast is still on the cool side after the departure of an out-of-season nor’easter, most regional citygates were up slightly (New England’s Tennessee Zone 6 and Algonquin citygate were notable softer exceptions). A stationary front will divide Midwest highs in the 60s and 70s to the north of the front from highs in the 90s and 100s to the south of it through the weekend, according to The Weather Channel (TWC).
The eastern end of the South is where much of the resurgence in cooling load is occurring. Previously milder than normal for early June, the eastern South is starting to join the region’s already hot and muggy western section in temperatures more appropriate for early summer. Atlanta’s high is expected to approach 90 degrees Friday.
Although communities along the West Coast will continue to enjoy fairly comfortable temperatures, inland areas of the West are due to swelter in the 90s, TWC said. And of course the desert Southwest will still be hitting the 100s and 110s, which is a summer norm.
The Energy Information Administration was near the lower end of the range of prior expectations in estimating a storage build of 77 Bcf for the week ending June 2; consensus guesses had centered around the mid 80s Bcf. Despite continuing weakness in the oil markets, Nymex’s natural gas futures traders took the inventory report as a bullish signal and sent the July contract 21.7 cents higher on the day.
Citigroup analyst Tim Evans commented, “Our own 95-105 Bcf estimate was wide of the mark and, apparently, the consensus was correct to ignore the Memorial Day holiday, which was good for an extra 16 Bcf in refills on average over the past five years. We think this low injection suggests some degree of producer restraint, with production scaled back closer to the level of actual customer buying interest.”
As it had warned Wednesday (see Daily GPI, June 8), Tennessee said it will be required to restrict interruptible storage injections — but only for the upcoming Saturday-Monday period at this point (see Transportation Notes).
Temperatures have been getting hotter than people expected, said a Midcontinent producer of Thursday’s mild cash firming. It may still be moderate to cool across the northern tier of states, but it’s hot in a lot of other places, he added. Usually cash prices would be unable to overcome a screen plunge of more than 40 cents the day before, but many eastern points were pulling it off, he noted.
The cash market should be up at least a few more cents in general Friday in sympathy with the Nymex show of strength, but the weekend effect will temper any new gains, the producer continued. He reported making late Panhandle Eastern deals that went for $5.38-40, up to a nickel above the pipe’s average. Such late upticks are often indicative of where prices will be heading the next day.
The producer said he made a few early July basis trades Thursday, and the trend was downward. A Consumers Energy citygate in Michigan went for plus 7 cents basis early (“naturally that got hit quickly,” he said) but the turned into negative territory later, going for as low as minus 5 cents in the afternoon.
There was definitely more load in the market, a Gulf Coast producer said, but he was not sure why. His company was seeing power generators ordering a little more gas than they had been earlier in the week, but it wasn’t any great jump, he said. He also expects modest cash gains Friday based on Thursday’s Nymex strength and further increases in cooling demand.
Illustrative of how cool weather in the Northeast at midweek cut into regional demand was Transco’s nominated flow of 1,415,000 MMBtu/d Wednesday at Zone 6-New York City. That was considerably less than the month-to-date average of 1,466,000 MMBtu/d for the point, according to analysis by Bentek Energy.
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