What several sources believe may be an extended period of slow, often featureless and softer cash trading was launched Tuesday with all points on the same falling price page. Trends were more consistent across the entire market, with a large majority of points registering declines from a little less than a dime to about 15 cents. More modest drops tended to occur in non-Permian Basin western markets, while larger losses were recorded in the Northeast.
“Fundamentals seem to be just about worn out,” commented a Gulf Coast marketer. Potentially there could be a rally on cold weather news, he added, but there’s none in sight at this point, and besides, it would take a heck of a lot of really cold weather to turn this market around.
A Midwest citygate trader had a similar viewpoint. “It looks like a slow trudge down in the market for the foreseeable future,” he said. Cash is trying to hang in there as best it can, but the screen seems to be dragging it down, he added. He reported talking to some people in an Upper Plains state Tuesday, where snowy weather is not at all uncommon at this point in November or even as early as October. “They said it was beautiful weather there.”
The latest six-to-10-day forecast from the National Weather Service holds no encouragement for bulls. It projects a vast sea of above normal temperatures enveloping nearly all of the U.S. through mid-November, with only a couple of sections along the West Coast predicted to have below normal readings.
Although Rockies numbers were relatively firm compared to the overall picture Tuesday, a marketer noted that extra supplies are being forced into the regional market by Questar’s requirement that all interruptible customers of Clay Basin storage must reduce their working gas inventory to zero through either withdrawal nominations or transfers to FSS (firm) accounts by Friday. However, that situation will be in effect for only two more days, he said.
There is a tremendous lack of physical market currently, and because many November-March winter term deals have just kicked in, that’s cutting demand even further, a Houston-based source said. “A lot of people are very happy to have invested in weather derivatives for this winter,” and the way things are going, “November may pay for itself in that respect [derivatives].”
The really scary part, the source thinks, may come in the last two weeks of November when “we had such prolific storage withdrawals” during the comparable period last year. With upcoming storage use unlikely to come anywhere near those levels, it opens the possibility of such depressed prices that the voluntary shut-ins that some people had thought might occur around early October (see Daily GPI, Sept. 6) might very well become a reality.
In a reflection of how the market mood has executed a total about-face from October to November, Sonat estimated Tuesday that its cumulative system cash-out imbalance for November was 709,377 dekatherms long as of Sunday. The pipeline ended October estimating the monthly system imbalance at nearly 2 million dekatherms short.
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