Several traders had expected that the cash market had one more day of firmness left in it before softening for the weekend, but Wednesday’s screen gain of nearly a dime and continued cooling demand proved insufficient to avert price losses across the board Thursday. And despite a bullish storage report that prompted a screen spike Thursday, sources continued to look for further declines Friday.
Flat to moderately higher numbers at a few points ran contrary to overall price dips ranging from about a nickel to a little more than 15 cents.
The Energy Information Administration estimated that 72 Bcf was injected into storage last week. The volume was at the low end of previous expectations and set off a buying spree at Nymex. The natural gas screen ended the day up 22.1 cents, and its strength was complemented by big jumps in the petroleum products line. Crude oil for September delivery jumped over the $41/bbl hurdle as concerns about the economic fate of Russia’s biggest oil producer and potential terrorist strikes against Mideast production facilities continued to weigh on trader psychology.
Temperatures remained warm to very hot across most of the U.S. Thursday, but a cold front is due in the Midwest this weekend. The same front was expected to reach the Northeast even earlier, bringing cooling rains Friday. And eventually it is projected to reach the western parts of the South, lowering air conditioning load in that region. The West’s forecast for the weekend is mixed, with cool conditions from the Rockies through the Upper Plains balanced by unseasonable warmth in the Pacific Northwest and continued scorchers in the desert Southwest.
“People were thinking the spreads were there to inject last week” despite hot weather, which helps explain the surprise at such a low storage build, a producer said. Swing prices rose up to 15 cents in the few late deals done after EIA issued its report, which tended to limit losses somewhat, he added.
For an intrastate Texas trader, “it doesn’t really matter what the storage report was.” Even with the relatively low number for the week ended July 16, the industry is still going to have full inventories when the injection season ends, he said. He anticipates that prices will be lower Friday, even with Thursday’s screen spike for support. Katy was fairly strong on fundamental cooling demand, recording one of the day’s smallest drops of about a nickel. The trader reported having a few people calling about August deals, “but it’s just tire-kicking so far.”
In an updated six- to 10-day forecast Thursday, the National Weather Service predicted that above normal temperatures will return to the Northeast and Upper Midwest around the middle of next week. It had previously indicated that nearly all of the eastern half of the U.S. would be dominated by below normal temperatures during the July 26-30 workweek.
A tropical wave in the eastern Caribbean Sea, which had been regarded as having potential for developing into a tropical depression or stronger earlier in the week, faded as a market influence after shearing winds “ripped it apart,” as The Weather Channel described the wave’s demise.
A Texas-based producer thinks it will be Monday before any serious August trading gets going. People have got all next week in which to complete bidweek business, he reasoned, so they might as well wait for post-weekend updates on weather forecasts and a better sense of where the screen might settle.
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