Prices were mostly softer again Thursday, but the declines were smaller than Wednesday’s in nearly all cases and a few flat to slightly higher points emerged Thursday. Although moderating weather trends were under way, temperatures in the Northeast and Midwest are due to remain below normal entering the weekend, and highs in the 100s will continue in the desert Southwest.
Several bearish influences will converge to make “major softening” a near certainty Friday, one source said. He ticked off this list: an expiration-day screen drop of nearly 20 cents Thursday; lighter heating load in northern market areas combined with less cooling load in the South; further growth in the year-on-year storage surplus; and the enhanced dropoff in industrial demand associated with a long holiday weekend.
The Energy Information Administration estimated a storage injection of 93 Bcf for the week ending May 20. Although the volume was comfortably within the range of prior expectations, it was a tad higher than the consensus. Nymex traders treated the report bearishly, breaking once again from mildly firmer oil prices to send June futures off the board down 19.2 cents to a $6.123 settlement.
“It’s raining in Houston; that’s news,” said a marketer in the city Thursday afternoon. That was part of a pattern of moderately cooler temperatures within Texas and across much of the South, he noted. Meanwhile, the Chicago citygate market that he trades was lackluster, with some load getting backed off as Midwest temperatures climb a bit from recent chilly levels.
As if to confirm that southern weather was moderating, Florida Gas Transmission ended Thursday an Overage Alert Day notice that had been in effect for three days.
A Northeast utility buyer said his swing purchases Thursday were less than usual both because regional temperatures would be rising Friday and “we’re limited on daily storage injections.” Observing that the screen closeout at $6.123 was accompanied by Henry Hub baseload for June going for around $6.20 that afternoon, he said bidweek prices in the Gulf Coast actually strengthened a bit instead of being taken lower by screen.
A Gulf Coast marketer agreed that June Henry Hub numbers were around $6.20 in Thursday’s late deals today, but said that was down from the low $6.30s Wednesday. Most bidweek pricing in the Gulf Coast fell 10-15 cents from the day before, he said.
Midwest basis continued to get stronger in conjunction with the recent screen weakness, another marketer said. He saw Chicago fixed prices at $6.28-29 Thursday, and said citygate basis got as strong as plus 15 cents, a far cry from the flat basis levels being reported a week earlier. Part of the reason may be that Midwest temperatures look to be above normal in early June, he said.
The marketer believed the bulk of June business had been finished Thursday, saying people wanted to be able to leave early Friday for the long weekend and probably didn’t want to think about doing any more June deals on Tuesday. In fact, a lot of traders have scheduled vacation next week to coincide with the Memorial Day holiday, he said.
A Houston-based trader said he understood that quite a few western utilities, especially in California, were buying at fixed prices for June, adding that they don’t often do that unless offers of indexed deals carry a premium to index. Buying fixed-price gas is their effort to meet index-or-below supply cost incentives from regulators, he said.
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