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Most Points Down Again, But Screen-Based Rally Seen
The market extended its slide at most points Tuesday as declining cooling load in the West joined already moderate weather in much of the rest of the U.S. The previous day’s 14-cent drop by June futures contributed to Tuesday’s overall cash bearishness.
The Midcontinent/Midwest and several locations in the West recorded most of the flat to about 15 cents higher price moves. The rest of the market saw losses ranging from 2-3 cents to nearly 45 cents.
Sources see chances of an overall cash rebound Wednesday as likely after June natural gas spiked by 41.1 cents in a reconnection with the strength of crude oil futures, which moved the record bar even higher with a daily settlement above $129/bbl (see related story).
The West is starting to cool down after about a week of intense heat in much of the region. Temperatures in the desert Southwest will continue to approach and in some instances exceed 100 degrees Wednesday, The Weather Channel (TWC) said, but overall the West has moderated considerably. The retreat in California cooling load was reflected in large San Juan Basin declines, which occurred despite El Paso declaring a Strained Operating Condition due to low linepack and Transwestern ending a partial outage of its San Juan Basin lateral Wednesday (see Transportation Notes).
Air conditioning demand in the South is still relatively subdued but could be about to become a bigger factor in the gas market as most of Texas, Louisiana and the Florida peninsula will bake in the 90s Wednesday, according to TWC. Temperatures in the Midwest and Northeast will continue to range from seasonal to below normal.
The two NiSource pipes, Columbia Gulf and Columbia Gas, signaled the major market weakness that is expected over the holiday weekend. Both said that in anticipation of low market demand during that period, they may be required to issue OFOs unless shippers balance their nominations carefully.
Florida Gas Zone 3 achieved a small gain despite Florida Gas Transmission canceling an Overage Alert Day, but the Florida citygate was down slightly.
It’s no surprise that Northeast citygates would be weak with spring-like temperatures dominating the climate, said a regional marketer. However, he added that cash numbers “will certainly be up” Wednesday based on Tuesday’s futures strength. But the screen is about all that the physical market has going for it currently, he said. Calling it “very bearish weather,” he didn’t see any other support for cash other than futures for a while. Temperatures 5-6 degrees below normal are likely to last for the rest of the month in the Northeast, he said.
Gulf Coast-Northeast spreads were wide enough Tuesday to allow “a little bit” of profit margin on transporting gas, the marketer said.
Saying “that was a pretty strong move higher” by June futures, a Gulf Coast producer agreed that higher cash prices are likely Wednesday. But weather fundamentals continue to look rather bearish, he added.
Citi Futures Perspective analyst Tim Evans is expecting storage pulls of 80 Bcf, 85 Bcf and 105 Bcf to be reported for the weeks ending May 16, May 23 and May 30, respectively.
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