A couple of sources thought Monday’s trading might have established a flexible template for much of October: softening at nearly all points that was fairly moderate at about a dime down, or less in most cases, and accomplished amid quiet activity. Fundamentals were still weak; although virtually all areas basked under sunny skies, temperatures are still mild to chilly everywhere except in the desert Southwest and the Florida peninsula.
Pretty much everything happened within about an hour Monday morning, “then it was all over except for the shouting,” said a Midcontinent trader. He sees cash as likely to continue a slow descent on most days this month, but granted there could be mini-rallies mixed in. “People are fat, dumb and happy with their storage,” he said, adding that actually he was surprised when “a lot of the pipes allowed us to keep injecting into storage for Tuesday. I thought they might be starting to cut us back by now.”
A tropical wave was approaching the Windward Islands (southern half of the Lesser Antilles chain between Puerto Rico and Venezuela) Monday, but it was considered weak. Under such benign Atlantic tropical storm conditions and with storage quickly approaching topping-off points, traders see cold weather as the only factor that could potentially arrest the price slide. Support for such an eventuality grew as WSI Corp. became the latest to forecast colder than normal autumn weather for some key market areas (see related story).
One marketer was able to detect a small glimmer of bullishness. A while back people were saying the U.S. might not ever be making fertilizer (of which natural gas is a major feedstock component) again because of high gas prices killing the economic incentive. “But now, with these prices, the fertilizer plants are coming back again,” he said.
A western aggregator reporting much smaller swing volumes than usual said he hadn’t left much in the way of open positions for October, adding, “I think you’ll see a lot of that around the industry.”
Although Florida Gas Transmission did not issue a new low-linepack OFO (which has been common in recent weeks), two events conspired to give Florida citygates Monday’s only sharp increase. First, the Sunshine State was living up to its nickname, as clear skies began raising temperatures again following last week’s cooling rains. Second, an FGT pipe replacement project upstream of Compressor Station 3 began Monday and is expected to run through the end of the month, cutting a sizeable amount of Zone 1 receipts, including MOPS, from the pipeline’s market area.
Florida deliveries around $2.90 remained the most expensive gas by far, as only a few other points barely managed to clear the $2 level.
A marketer noted that Transco still reigns as king of the hill on the Gulf Coast price heap because of cheaper transportation to the Northeast. “Tennessee and Texas Eastern tend to ‘strand themselves’ at this time of year because of higher rates, he said. “They’re often the last choice for long-haul gas moving when the market is as slack as it is now.”
Because it was getting hotter in Southern California, one trader expected border-SoCalGas prices to test $2 Monday, but the closest they got was a little over $1.90. With monthly balancing on the SoCal system, “even when we get any demand spikes, people are likely to just wait and make up volumes over the weekend rather than drive the price up,” he said.
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