The cash market shrugged off major futures weakness a day earlier and a continuing dearth of significant weather-based load by recording gains at a majority of points Tuesday.
Nearly all of the losses from a little less than a nickel to about 45 cents occurred in the Midcontinent, Rockies and San Juan Basin. Otherwise gains ranged from about a nickel to nearly 60 cents.
The SoCal citygate debuted as a daily index with numbers mostly in the mid to high $5.80s, or just about a dime above the Southern California border. The PG&E citygate was much stronger than its more southerly counterpart with an average of nearly $6.55.
Northern Natural’s demarc and Ventura points were especially strong as heating load is starting to build in the Upper Midwest. The Minneapolis-St. Paul area, which constitutes the bulk of Northern’s market-area load, was expected to see overnight lows remain just above 40 Wednesday.
The reduction of offshore gas shut-ins was slowing again, with 53 companies telling Minerals Management Service they had restored another 115 MMcf/d of production, leaving Tuesday’s outages at 3,384 MMcf/d (see related story). Over the weekend 400 MMcf/d had been restored.
The market could not count on the weather for much support, although it’s conceivable that some furnaces are getting turned on in northern market areas near the Canadian border. But with few lows getting below the 40s, heating demand is still fairly inconsequential at this point.
A cold front will take Northeast temperatures slightly lower Wednesday while the Midwest remains chilly. Highs ranging from the mid 70s to the mid 80s should keep conditions in the South fairly comfortable, with only moderate air conditioning needs expected.
Hot weather is continuing in the desert Southwest, but inland California has receded from recent highs around 90. Moderate to cool remains the watchword for the rest of the West.
Subtropical Storm Laura graduated to tropical storm status Tuesday, “but not for long,” said the National Hurricane Center (NHC). Laura remained well out to sea from the Canadian Maritimes provinces and was expected to see gradual weakening during the next couple of days. Assuming it remains in existence that long, Laura’s projected path had it approaching the northern end of the United Kingdom this weekend. A large area of cloudiness, embedded showers and thunderstorms extending across parts of the far western Atlantic, Florida, the southeastern Gulf of Mexico, western Cuba and the northwestern Caribbean Sea was amid conditions unfavorable for development, NHC said.
A Houston-based marketer had no good explanation for the overall cash strength. He still doesn’t see much in the weather outlook that would have helped raise prices Tuesday in spite of prior-day futures weakness. It wasn’t exactly logical to see rising cash prices in that situation, he said, but trading for first-of-month flows “is always a crapshoot.” He suggested that maybe some traders were bidding prices higher to get supplies that they didn’t pick up as October baseload during bidweek.
The marketer said he expects a higher physical market again Wednesday, especially now that it has prior-day futures backing. The November gas contract regained 21.7 cents of Monday’s loss Tuesday (see related story).
Bidweek was “about as normal as it could be” considering the ongoing economic upheavals and continuing effects of Hurricane Ike on the Houston-based trading community, the marketer continued. He said $7.07 was his estimate for the Chicago citygate first-of-month index.
Excluding most of the Pacific Northwest and the northwestern corner of California, the National Weather Service predicts a wide swath of above-average temperatures during the Oct. 6-10 workweek from most of California and the desert Southwest through the Rockies, Plains, upper Midcontinent, Midwest and Northeast. It looks for below-average readings from East Texas through all of Louisiana and the southern halves of Mississippi, Alabama and Georgia into all of Florida. The below-normal area also includes a thin coastal slice of South Carolina.
Stephen Smith of Stephen Smith Energy Associates is projecting a storage build of 93 Bcf for the week ending Sept. 26, which he said replaces his original estimate of 88 Bcf. Tim Evans of Citi Futures Perspective looks for additions of 85 Bcf, 70 Bcf and 65 Bcf for the weeks ending Sept. 26, Oct. 3 and Oct. 10, respectively.
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