With the start of another week of what promises to be widespread extra-hot weather combining with last week’s futures rally being extended by another 23.4 cents Friday, it was hardly surprising that cash prices were up strongly Monday at most points. Further stirrings of tropical activity in the Atlantic, including the formation of Tropical Depression 4, and the return of industrial load from its usual weekend hiatus also lent strength to the cash market.
Only declines of up to about 20 cents at several Rockies points were left out of double-digit gains in the rest of the market. The advances ranged from about 15 cents to 95 cents or so, with a solid majority of them exceeding half a dollar.
High heat levels remained in effect through the weekend throughout the South, Southwest and Rockies. The Midwest had seen some moderation late last week but was due to start climbing into the lower 90s again in its lower reaches Tuesday, with the Upper Midwest expected to follow suit a day or two later. The Northeast will be getting a relative break from the heat for a while longer, with high readings limited to the mid 80s or less Tuesday.
Most of the tropical buzz early Monday involved a low-pressure area stretching from the northwestern Caribbean Sea to the Florida Straits, which generated early strength in both natural gas and crude oil futures. However, it didn’t take long for Nymex traders to dismiss that as a nonevent because conditions were unfavorable for its development.
A much more remote but overall more credible potential threat to Gulf of Mexico production came in the form of Tropical Depression 4 (TD4), which the National Hurricane Center (NHC) said could become a named tropical storm Monday night or Tuesday. At 5 p.m. EDT Monday the center of TD4 was about 1,900 miles east of the Lesser Antilles (the island chain between Puerto Rico and Venezuela that marks the eastern end of the Caribbean Sea). It was moving westward at the relatively rapid pace of nearly 20 mph, NHC said, which would have it approaching the northern end of the Lesser Antilles by Saturday afternoon.
The physical market, which had strong prior-day support from September futures both Friday and Monday, will have to get by with negative screen guidance Tuesday after the prompt-month contract closed out Monday down 2.6 cents after spending some time in positive territory during the morning.
The market got “a little more exciting” with the formation of TD 4, a Texas-based marketer acknowledged, but it is a long way out in the Atlantic and could fizzle out before reaching the Caribbean. The low-pressure area in the eastern Gulf was of more immediate concern for a while, he said, but traders didn’t take long to dismiss it as irrelevant to the gas market.
September futures were getting weaker in after-hours trading Monday afternoon, the marketer noted, which led him to expect softening cash prices relative to the screen Tuesday. But all bets are off if the contract rebounds Tuesday morning, which could lead to some further cash firmness, he said.
He observed that power generation demand was starting to ramp up again in the Lower Midwest with highs in the 90s due to start returning Tuesday.
A Calgary-based producer said prices tended to drop pretty quickly after forecasters downgraded the Gulf of Mexico storm possibility. NOVA Inventory Transfer (NIT) basis got about US10 cents weaker relative to September futures Monday as no plant turnarounds are scheduled in the near term and supply is plentiful, he said. Westcoast’s Pine River Gas Plant had some supply issues over the weekend; Westcoast Station 2 had been trading at a discount of C7 cents to NIT at the end of last week, but Station 2 reached a premium of about C20 cents Monday because of Westcoast shippers having to make up weekend imbalances related to Pine River, the producer said. That also resulted in notable price strength at the Pacific Northwest points of Sumas, Kingsgate and Stanfield.
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