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Most Points Drop; A Few See Mild Firmness
A few flat to modestly higher numbers, mostly in the West and Midcontinent, surfaced here and there Monday, but prices were softer at a solid majority of points. They were pressured lower by Friday’s 7-cent screen decline and by moderating weather trends that so far have reduced heating load without replacing it with significant amounts of power generation load from higher temperatures.
The minority increases ran as high as a nickel or so in San Juan Basin. On the other side of the price coin, losses ranged from a couple of pennies to as much as about 15 cents.
Monday’s uptick of a little more than a nickel by natural gas futures, along with strong gains in Nymex’s petroleum products trading, gives cash gas a chance to stage a small rally at more points Tuesday, one source noted. However, there certainly is no guarantee of higher physical prices, he added, since the above normal temperatures that are expected to blanket most of the East this week are merely raising conditions from chilly to comfortable in the Midwest and Northeast.
With widespread highs in the 80s predicted for Tuesday for much of the South, with the 90s possible in parts of Oklahoma and Texas, power generation demand is starting to rise in the South. And The Weather Channel said snow is likely in mountainous areas of the Pacific Northwest, Great Basin and northern and central Rockies. However, because relatively few people reside in most of those parts of the West, the boost in heating load should be minuscule.
Basis spreads from the Midcontinent to the Midwest tightened considerably when several flat to slightly higher production-area points combined with citygate declines ranging from about a nickel to 15 cents.
Western prices got a little extra support from weekend high-linepack OFOs being lifted Monday by SoCalGas and PG&E (see Transportation Notes).
“We’re into runoff season” when hydroelectric generation gets bigger in the Pacific Northwest, said a Calgary-based producer, so his loads from the region’s gas-fired generators are weak for right now. He expects that situation to turn around next month, for not only will there be more generation demand overall in June, but Westcoast will be performing annual turnaround work at its McMahon Gas Plant, which will reduce the available gas from British Columbia significantly. With both Sumas and Westcoast Station 2 currently soft, “it gives us a chance to flip some supplies over into the intra-Alberta market,” he noted.
The producer reported having no problems from PG&E’s Sunday OFO, saying his company takes its gas to the California border at Malin and relinquishes possession of it there. “We don’t transport” on PG&E’s intrastate system because of problems with California taxes, he commented. He added that it looks like the market is entering a very slow period, which is hardly surprising considering it’s a shoulder month and vacations are popular with the schools getting ready to let kids out for the summer.
Citigroup analyst Kyle Cooper made an initial estimation of a storage injection in the mid to upper 40s Bcf to be announced for the week ending May 6.
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