Southern heat levels were expected to remain static or rise slightly in some sections into the low to mid 90s Thursday, but otherwise, except the desert Southwest and the Denver area of the Rockies, few other locations were expected to get above the 80s. Thus cash prices had to rely primarily on a prior-day increase of 6.3 cents by August futures, and possibly expectations of a moderately bullish storage report Thursday, in ranging from flat to nearly 15 cents higher at a majority of points.
The few almost imperceptible declines of 2-5 cents or so were scattered geographically.
The cash market will continue to have fairly substantive prior-day screen support Thursday after August futures went off the board Wednesday with a 9.9-cent gain to finish at $4.774 (see related story). The rise of less than 6 cents from the June closeout at $4.717 would tend to foreshadow only small if any increases in August first-of-month indexes.
IntercontinentalExchange (ICE), in its Bidweek Indications report, said August baseload tended to keep rising a few more cents in Wednesday’s third day of official bidweek activity. NGPL-Midcontinent saw one of the smaller increases of about a nickel Wednesday, ICE said, while Chicago citygates and Waha realized some of the largest increases of nearly 15 cents.
However, a modestly bearish factor in Thursday’s physical trading will be the fact that a weekend day — with its corresponding drop of industrial load — will be involved. Because the transition to Aug. 1 will occur on Sunday, traders will make deals Thursday for Friday-Saturday flows. Friday’s activity will cover Sunday-Monday flows.
A rupture Wednesday morning on intrastate Oasis Pipeline northwest of Houston (see related story) had essentially no effect on the market. Owner-operator Energy Transfer Partners said the section was quickly sealed off with no injuries or fire resulting, and it did not curtail any services due to rerouting gas around the blast site.
A PG&E high-inventory OFO had only minor negative impact on PG&E citygate and Malin prices, ICE said, reporting drops of only 2-3 cents or so at both locations. However, citygate volumes traded on the ICE platform tumbled from 691,800 MMBtu Tuesday to 465,300 MMBtu Wednesday. But Malin actually rose to 427,200 MMBtu from 407,500 MMBtu a day earlier, ICE said.
Florida Gas Transmission began the fourth week of an Overage Alert Day being in effect continuously by tightening the tolerance for negative daily imbalances to 15% Wednesday after having left it at 20% for several days previously. That caused an aberrational spike of a little more than 85 cents at the Florida citygate, but Florida Gas Zone 1 in South Texas recorded one of the day’s rare declines.
Kern River reported that its linepack has dropped below minimum target levels since Monday and was still tending to trend slightly lower Wednesday. ICE said prices into Kern River were up about a penny, but volumes fell by more than half from 45,000 MMBtu Tuesday to 20,000 MMBtu Wednesday.
Although the National Hurricane Center again had nothing new to report in Atlantic tropical activity, the scene was not totally devoid of developments. Brian Fortier, lead meteorologist with The Weather Channel, said Wednesday morning a tropical wave was passing westward through the southern Lesser Antilles and should reach the central Caribbean Thursday. Another tropical wave moving through the eastern Atlantic may arrive in the Lesser Antilles Thursday night or Friday, Fortier said. And a third wave had emerged off the western coast of Africa. However, little if any near-term development was expected in any of the three cases, he added.
The “hottest summer season on record remains stalwart from East Texas to the Northeast,” a Wednesday advisory by Weather 2000 said. Population hubs east of the Plains regions have been tallying peaks of 90, 95 and 100 at a record pace as heat waves return in persistent cycles, the forecasting service added. It was the hottest March-July period ever for the eastern U.S., it added; New York City is closing in on its #1 hottest July, and there were 13 straight days in which the thermometer topped 90 in Newark, NJ.
It was mostly a different story in much of the West, Weather 2000 continued. The Sierras, Cascades and northern Rockies mountain areas are wrapping up a rare heat spell amidst a generally cool summer, it said. More summer-like weather is finally arriving in the western states, Weather 2000 said, but coastal Southern California “remains immune, maintaining its coolest summer” in more than 40 years.
However, Barclays Capital analysts say that while hot temperatures across much of the Northeast continue to support cash prices at present, cooler temperatures at the end of the week should moderate temperature-related bullishness.
The National Weather Service (NWS) predicts above-normal temperatures in most of the eastern two-thirds of the U.S. during the Aug. 2-6 workweek. In its six- to 10-day forecast posted Tuesday afternoon, NWS excludes only normal conditions in nearly all of the Northeast extending through coastal Mid-Atlantic sections into northeastern North Carolina in expecting it to be above normal everywhere else east of a line running southward through the western ends of the Dakotas and Nebraska before curving slightly to the southwest through southeastern Colorado into central New Mexico. The only area of below-normal temperatures in the forecast is along coastal California and including most of Oregon and all of Washington state to the north.
Credit Suisse analyst Teri Viswanath expects a 29 Bcf storage injection to be reported for the week ending July 23, saying, “We estimate that total working gas in storage as of last week stood at 2,920 Bcf, or 93 Bcf below last year’s level. As a result of the increased cooling demand from the electric power segment, we expect the storage deficit to widen beyond 100 Bcf by the end of the month.”
Viswanath added that in her opinion, prices will likely remain within a 20-cent range over the next few weeks as lower year-on-year injections support the market. “However, once the heat index begins to drop in August, we suspect that the pace of injections will pick up significantly once again, putting pressure on natural gas prices.”
Tradition Energy’s Addison A. Armstrong said his estimate also is for an increase of 29 Bcf, while Cameron Horwitz of SunTrust Robinson Humphrey looks for a bigger build of 33 Bcf. Tim Evans, analyst for Citi Futures Perspective, had one of the largest expectations at 42 Bcf, but hat would still fall short of the five-year average injection of 50 Bcf.
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