Despite a lack of severe cold in most areas and mounting evidence that minuscule storage space remains for injections, most prices continued to advance Thursday. However, weakness in both the screen and physical fundamentals is expected to send the cash market lower Friday.
Several flat to about half a dollar lower points were scattered among gains that ranged from a couple of pennies to about 75 cents. Locations in Louisiana tended to record most of the larger upticks, although Columbia Gas in Appalachia joined Texas Eastern-West Louisiana as the day’s biggest gainers.
Although moderate to cool temperatures dominate much of the U.S. weather picture, the market was not devoid of weather support. A cold front will advance into northwest quadrant of the nation Friday, and New England will see lows near freezing, according to The Weather Channel. It also predicted a frosty Friday morning in parts of the South, with a cold front due to start moving into the region from the southern Plains Saturday.
But a Midcontinent producer said he continues to be amazed that the market remained in firming mode for the most part Thursday when most influences seemed weak to him. “Is anybody listening?” he asked. Some producers are having trouble placing gas on a day-to-day basis, but somehow most points have been climbing from Tuesday onward, he said.
The producer said many traders are talking about how much disconnect there is between futures and cash (Henry Hub in the mid $9.60s Thursday was about $1.70 below the daily Nymex settlement). “People that trade at Nymex are just completely different animals from those of us in the physical market,” he said. However, he expects the screen’s drop of nearly 30 cents Thursday to lead to declining cash numbers Friday.
The Energy Information Administration provided another bearish sign by reporting that storage inventories of 3,229 Bcf topped year-ago levels thanks to a build of 61 Bcf for the week ending Nov. 4. The volume exceeded consensus pre-report expectations, but its bearish nature was tempered somewhat because it included a reclassification of 10 Bcf from base gas to working gas. Nevertheless, Nymex traders still took the December futures contract 28.9 cents lower on the day.
A Dominion OFO related to a combination of excess receipts and little storage injection capability (see Transportation Notes) was just the latest pipeline indicator of storage rapidly fading as a potential destination for placing gas.
A Midwest marketer said storage facilities in Michigan are so full “that we can’t put in any more.” Consumers Energy is cutting external nominations 10% across the board while saying its storage inventories are “bursting at the seams,” she added. Midwest temperatures are fairly moderate for this time of year and should be as much as 12-15 degrees above normal around Thanksgiving, she added.
Prices have become somewhat affordable again recently, “but we don’t have any demand, which makes you wonder” why prices have mostly been rising in the last three days, the marketer continued. Regarding an extra-slow pace of recovery from Gulf of Mexico (GOM) shut-ins in the last two days, she was a mite suspicious that producers might not be so eager to pursue restoration efforts in order to prop up prices.
The effort to restore shut-in Gulf of Mexico (GOM) production is coming close to stalling. Based on reports from 66 companies, Minerals Management Service counted 4,015.50 MMcf/d in remaining outages Thursday — down a mere 17.02 MMcf/d from the day before. Cumulative shut-in volumes since Aug. 26 rose to 426.426 Bcf, equivalent to 11.683% of annual GOM output of about 3.65 Tcf, the federal agency said.
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