Tuesday’s late expiration-day spike of September futures had limited success in rallying the cash market Thursday. It struggled against the negative influences of generally moderate late-August weather throughout the northern U.S. and Canada, the lack of any new tropical storm activity and the prospects that Tropical Depression Ernesto will be dampening potential power generation load along the East Coast.
A majority of points recorded gains of 2-3 cents to about 20 cents. Several instances of flat numbers were observed, with other points falling anywhere from a little less than a nickel to a little more than 75 cents.
All of the most severe weakness was localized in the Rockies, which puzzled sources since no tangible factor was apparent as the reason. Low-end quotes at some Rockies points slipped below $4 for the first time since Questar did so in Sept. 17, 2004 trading for Sept. 18-20 weekend flows (see Daily GPI, Sept. 20, 2004). And with Northwest-domestic dropping a little more than 40 cents while Sumas realized a nickel gain, the Sumas premium over domestic gas on Northwest widened even further to well over a dollar.
The cash market is expected to be falling across the board for at least the rest of the week after October futures plummeted nearly 60 cents in their first session as prompt-month contract. Little if any severe heat is in the near-term forecast outside the desert Southwest, and the enhanced slump of industrial load over a holiday weekend will come into play Friday.
Even the South is losing some cooling load, partly due to Ernesto but also to natural climate changes. Atlanta, which had a high of 90 degrees Tuesday, was forecast to only hit the mid 80s Wednesday and Thursday. And at the other end of the region in Texas, few cities outside the southern end of the state are getting above the low 90s currently following an extended period of 100-plus readings through early this week. Across the Northeast and Midwest market areas, daily highs are only rarely getting above the 70s.
Ernesto, now downgraded to a tropical depression again with maximum sustained winds of about 35 mph, was producing heavy rains over central Florida Wednesday afternoon, the National Hurricane Center said. However, it has the potential to become a tropical storm again Thursday during a sojourn over open water that is expected to lead to a second U.S. landfall in South Carolina that afternoon. At 5 p.m. EDT Thursday the center of Ernesto about 25 miles west of Vero Beach, FL and about 55 miles south-southwest of Cape Canaveral, FL, and was moving north at nearly 14 mph.
A western utility buyer said he and colleagues were scratching their heads in puzzlement over why Opal and other Rockies points were tanking Wednesday for no apparent reason that he could see. “It doesn’t make any sense” about Opal, he said, especially with Kern River reporting normal linepack systemwide. With the Southern California border holding up while Opal numbers take a dive, it “makes a great [spread] situation” for those who have transport on Kern River to the border, he observed. But he still couldn’t figure out why the border didn’t fall in response to the production-area price weakness, or vice versa, why didn’t Opal get some support from stronger market-area prices.
Obviously Opal customers must be having difficulty finding storage space to park their gas and are finding almost no weather market in the Pacific Northwest, the buyer continued. However, he thinks the extreme Rockies market weakness will be a short-term situation. He said bidweek was pretty routine for his company, which finished September trading Tuesday.
A Northeast marketer concurred that very little remained to be done in September baseload business Wednesday and Thursday. He found “good selling interest” in the daily market Wednesday, but not as much buying interest. The big screen drop Wednesday should result in falling cash prices Thursday and Friday since overall fundamentals are still soft, he said.
Pipelines are warning customers that Northeast weather will stay very mild over the holiday weekend and they shouldn’t expect to use pipe linepack as a convenient parking spot for gas that they’re unable to find another home for, the marketer said. It’s always tough to contend with first-of-month conditions, so there will be some uncertainty in the market over the next few days, he added. “It looks like we may soon be seeing prices dropping to levels” that haven’t been experienced in a very long time, he said.
First Enercast Financial predicted a storage injection of 59 Bcf for the week ending Aug. 25. The Reuters news service survey of 18 industry players found a consensus estimate of a 54 Bcf build. The range of estimates submitted to Reuters was much tighter than usual at 44-60 Bcf.
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