Prices rallied by mostly small amounts at a majority of points Thursday, deriving support from the previous day’s 9.1-cent screen gain, a smidgen of heating load in the Rockies and areas near the Canadian border, and not much else. Moderate mid-October temperatures dominate much of the weather picture, and evidence continues to mount that storage injection capacity has grown very scarce.
Flat quotes were common in a market that saw gains of up to about a quarter. The Rockies, which saw wide price ranges, were a mixed bag for a change; Cheyenne Hub, CIG, Kern River and Northwest-South of Green River recorded losses of as much as about 95 cents, while other points in the region rose by as much as a quarter or so. Declines were few outside the Rockies and were limited to about a nickel.
Questar realized a gain of nearly 15 cents despite a shut-in test of its Clay Basin storage reservoir that began Thursday and will continue through Oct. 24. The lack of a Clay Basin injection option apparently was felt most by Northwest-South of Green River, which saw Thursday’s biggest drop by far.
The Energy Information Administration was well short of consensus estimates in the mid 50s Bcf when it reported a 39 Bcf storage injection for the week ending Oct. 12. However, despite an initial moderately bullish reaction, Nymex traders later pulled back and sent the November natural gas futures contract to an 8.4-cent loss on the day. Gas ignored a show of super-strength by crude oil, which skyrocketed by more than $2 to post yet another record settlement of $89.47/bbl.
Citigroup analyst Tim Evans, who had predicted a high-side storage build of 62 Bcf, said he thought the unexpectedly low volume “may reflect low LNG [liquefied natural gas] imports and broader supply restraint/pipeline issues, as demand was not remarkable.” In another note, Evans said that “while there is still time for a more significant storm to come along that might disrupt natural gas production from the Gulf of Mexico, the odds are getting long once we pass mid-October. Not only are storms less frequent historically over the balance of the season, but the landfalls also tend to occur around the western Caribbean and South Florida, not the Gulf Coast.”
Falling cash prices are expected Friday due to Thursday’s futures weakness, the drop of industrial load during a weekend and forecasts of continuing relatively mild weather in most areas. The South, which still had a little cooling load through Thursday, will see much of it disappear Friday as a cold front limits highs in most of the region to the 70s. Temperatures will remain quite comfortable in the Northeast, although a fair amount of chill will be arriving in the Midwest. Chicago’s high of about 77 Thursday is expected to fall to 62 Friday.
Florida Gas Zone 3 and the Florida citygate both were up nearly a nickel as Florida Gas Transmission extended an Overage Alert Day into its third day Thursday.
Futures had an initially positive reaction to the storage report, then went “big-time negative” before recovering to some degree near the end of trading, a Northeast marketer noted. He expects softer cash numbers Friday, saying there is “certainly no cold weather on the horizon.” Gulf Coast-Northeast basis spreads haven’t been working for transportation in quite a while, he said, “so people either sit on their gas or sell it.” No one is aggressively buying for storage anymore because only a few still have injection space left, the marketer noted.
A Midwest marketer reported that Consumers Energy had ordered 40% cuts in gas volumes delivered to its system Friday, so her company was cutting baseload supplies “like crazy” Thursday. The utility didn’t say whether the reduction would continue beyond Friday, so she thought it likely would be a day-by-day decision. Consumers didn’t specify why it ordered the cuts, she said, but her company assumed that current-burn demand was light and Consumers had little if any storage injection capacity remaining.
Michigan Gas Utilities also will begin curtailments Saturday, the marketer continued. Mid 70s high are due in the region Friday, so essentially there is no heating load or cooling load at all, and it looks like that will continue through next week, she said.
A utility buyer in the South also was wrestling with storage problems. “We’re looking for places to put gas at this point,” he said, because there is no space left in the company’s storage accounts. It’s the middle of October and highs are still in the mid 80s, he said, although cooler weather would be arriving as early as Friday.
The buyer said his utility is trying to shed gas between now and the first of November, when winter term deals will start kicking in. It’s not buying any new daily gas, but instead is selling baseload into the spot market, he added. That’s not a bad thing to do now because daily prices are substantially above first-of-month indexes, he said, and it also helps resolve some operational problems.
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