A modestly higher Gulf Coast point prevented a clean sweep of continuing price softness Thursday. A lack of weather-related demand, the additional loss of industrial load associated with a long holiday weekend and prior-day screen weakness combined to send prices lower at all other points.
It was somewhat remarkable that NGPL-Louisiana avoided Thursday’s overall declines, since virtually all of the losses were in double digits. They ranged from just under a dime to 45 cents or so. The West took most of the biggest price hits.
As it had been for several days, the intermountain West remained the last bastion of serious heating load in the U.S. going into the weekend, although the West Coast was expected to see temperatures five to 10 degrees below average. Thermometer levels would be “well above average” east of the Rockies, according to The Weather Channel.
The forecast was for summer-like warmth in the South into the beginning of this week, and the Midwest was due to be getting almost as warm as the South. The Northeast was expected to stay mild through at least Saturday, but then to gradually return to average or slightly below average temperatures as the weekend ended.
The nascent 2006 injection season appears to have arrived precisely on schedule. After the Energy Information Administration reported a smaller than expected 10 Bcf pull for the final week of March, it estimated a build of 19 Bcf — also smaller than expected — for the first week of April. Most prior expectations had centered around an injection in the area of 30 Bcf. Futures traders clearly saw the report as bullish, turning what had been a dime-plus deficit for the May contract prior to the report into a dime-plus gain soon after the EIA announcement. Egged on by crude oil futures that also went from negative to positive, the screen kept climbing to end the day up 32.7 cents.
Chances of a modest overall cash rally Monday appear to be fairly good. Not only will there be prior-trading-day screen support and returning industrial buying, but quotes were going higher in late deals in some market areas, which often is a good indicator of next-day price direction.
The Northern Natural Gas bulletin board provided a clear rationale for the pipeline’s demarc and Ventura trading points plunging by more than 40 cents each. The system’s normal weighted temperature at this time of year is 45 degrees, a posting said, but Northern projected system averages of 64, 64, 62 and 59 degrees for the four-day Thursday through Sunday period.
The market looked very soft in early trading, a Northeast marketer said, but prices turned higher in late deals as new weather forecasts indicated some cooler weather in the region Monday and Tuesday. He added that he was still seeing fairly good buying for storage injections.
The marketer noted that basis from Henry Hub to the Northeast had shrunk to around 30 cents in some cases. That didn’t cover variable transportation costs, he said, so his company’s strategy was to sell in the producing area and buy at the citygate. He reported being “kind of surprised” by the screen’s strength following the storage report.
A Southern utility buyer said his company is looking for ways to increase its storage capacity, but also “trying to figure out how to pay for it in our rate base.” On the possibility of a price crash in late summer or early fall as storage accounts supposedly fill up early, he said his company is pursuing its injection schedule fairly aggressively at the current time, “but we’re leaving a little room for injections later” around the August-September period in case gas does get much cheaper then. He observed that such a move carried a bit of risk if a very hot summer or major hurricane-caused shut-ins of Gulf of Mexico take prices even higher than now, as the Nymex strip indicates.
Meanwhile, “we’re approaching record warmth around here,” the buyer continued. The utility hadn’t seen all that much air conditioning load as of Thursday, he said, but it expected quite a bit more in the following few days.
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