A few flat to a little more than 35 cents lower points notwithstanding, most of the cash market was decidedly bullish Tuesday as colder weather had already arrived in some areas or was on the way in others. The gains were pretty much all weather-driven, sources said, since futures and storage influences tended to remain on the negative side.
Upticks ranged from 2-3 cents to nearly $1.40. Quite a few points in the Rockies and Midcontinent recorded gains of around a dollar or more.
Storms brought cool temperatures to nearly all of the Midwest Tuesday, but the thermometer is drop even lower Wednesday. Highs in the 30s and 40s will dominate the Great Lakes are and Lower Midwest, The Weather Channel said. Similarly stormy and cold conditions are continuing in the upper West and Western Canada, while the South and Northeast will get their turns at enduring stormy cold fronts Wednesday.
MRT was about the only pipe to institute an OFO-like alert against cold weather (see Transportation Notes). Transco let an Imbalance OFO remain in place for Wednesday, and PG&E expanded a customer-specific high-inventory OFO into a systemwide one. However, PG&E’s OFO essentially was shrugged off by rising western points. The PG&E citygate and Malin were up by a little more than 15 cents and a little more than 30 cents respectively.
With substantive losses at Texas Eastern M-3 and Transco’s non-New York City Zone 6 pool to back him up, a Northeast marketer tended to dismiss Tuesday’s overall advances as relatively insignificant. “We’re still enjoying our extended fall,” he said, adding that regional weather is not really wintry yet. “We’ve only had two frosts so far” in the Northeast, he pointed out. Heating degree days will start to increase over the next few days, he acknowledged, but basically it will be a case of cooling off “to a normal November day, so I don’t see the cold spell being a big event at this point.”
Even with Henry Hub’s gain of about a nickel and a loss of similar size on the screen Tuesday, the Hub is still well over $2 behind December futures, the marketer noted. Something that should hold the budding bull market in check is that pipes to the Northeast are still “stuffed,” so it will take a while to work off those positive imbalances, he said.
However, although he was “not ready for winter yet” personally, a Calgary-based producer said the season was virtually here with a wind chill of minus four degrees F. Tuesday in his area. Thanks to much colder temperatures in the upper West and Midwest, the NIT (NOVA Inventory Transfer) market was very strong, he said. He saw no transport issues, saying the IT rate was favorable from Westcoast Station 2 to Sumas. “Actually, it’s nice to see us approaching winter pricing pretty soon,” he said.
Restoration of Gulf of Mexico shut-ins slowed drastically again. With 66 companies reporting, Minerals Management Service reported 3,714.72 MMcf/d as still offline Tuesday. That was only 27.31 MMcf/d less than the previous day’s tally.
The natural gas screen tacked on another 4.4-cent loss to Monday’s decline of 10.5 cents amid weakness in all of Nymex’s energy futures offerings. And even with the traditional storage withdrawal season under way, analysts see another bearish market influence in continued large injections during last week’s generally mild weather.
Analyst Ron Denhardt of Strategic Energy & Economic Research projects a storage injection of 55 Bcf for the week ending Nov. 11, saying that would compare with no change a year earlier. There is still 3.7 Bcfd of offshore production shut in, he noted, “but this is a substantial improvement over last month…Natural gas processing spreads are now positive so more ethane will be removed from the gas stream. This should tighten the supply-demand balance. We expect shut-in gas production to average 2 Bcf/d December though March.”
Citigroup’s Kyle Cooper was essentially in agreement, saying his final estimation for the upcoming storage report calls for a build of 52-62 Bcf.
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