Other than some frigid conditions in the western half of Canada and along some parts of the northern U.S. border, the cash market had little in the near term on which to hang a hatful of higher prices Monday. The return of industrial load from a weekend off was about the only immediate minor offset to generally cool to moderate temperatures in most areas.
However, traders undoubtedly were looking two to three days down the road, when significantly colder conditions are due to return to much of the eastern two-thirds of the U.S., in sending spot prices higher at all but three locations.
Only declines of about a dime or slightly less at Tennessee Zone 4’s Line 300 and Westcoast Station 2, along with flat NOVA Inventory Transfer numbers, failed to participate in Monday’s gains ranging from about a nickel to the 30-cent vicinity.
Nymex traders had no guidance to offer the cash market after Friday’s scant 0.1-cent futures loss, but the impact will be negative Tuesday after the prompt-month contract fell another 2.5 cents (see related story).
Although it seemed unlikely, a wee bit of “storm hype” may have been involved in Monday’s price firmness. Tropical Storm Rina formed during the weekend in the western Caribbean Sea and quickly graduated to hurricane status Monday as it looked positioned to be able to move between Mexico’s Yucatan Peninsula and the western end of Cuba into the southern Gulf of Mexico. However, Rina instead was expected to brush against the northeastern edge of the Yucatan before curving back to the northeast toward western Cuba.
The National Hurricane Center also was monitoring disorganized showers and thunderstorms in association with a broad low-pressure area over the southeastern Caribbean, but gave the system only 10% odds of becoming a tropical cyclone within 48 hours as it moved to the west-northwest at about 10 mph.
Besides Western Canada and the northern edge of the U.S., a few other areas such as the Rockies could expect major chill Tuesday. For example, Denver had a forecast of snow and a low in the upper 20s. CIG noted forecasts of colder temperatures for Tuesday evening and Wednesday in reminding customers of potential restrictions related to limited storage capabilities.
Northern Natural Gas also had a caution for its Upper Midwest customers, saying on the bulletin board that with a normal system weighted temperature of 46 at this time of year, it expected averages to drop from 54 Monday and 49 Tuesday to 42 Wednesday and 38 Thursday.
Westcoast reported its linepack trending toward higher-than-desired levels, which likely had something to do with Station 2 being one of Monday’s few softer points.
A Houston-area marketer said although much of the Midwest would be only moderately cool through Tuesday, it was “really cold” in Western Canada, so local markets likely were keeping more gas at home instead of shipping it toward the Midwest. He also noted fairly large basis spreads on either side of 30 cents from Texas to the Chicago citygate, which likely was related to a Station 106 constraint on NGPL (see Transportation Notes).
It’s too soon for any bidweek rumblings, the marketer continued, but his company is hearing that quite a few utilities don’t plan on buying any November baseload because they expect to patch any supply holes with daily market deals until it turns much colder around December.
Gas-oriented drilling activity fell by nine rigs to 927 in the week ending Oct. 21, according to the Baker Hughes Rotary Rig Count. Three more rigs were activated in the Gulf of Mexico, Baker Hughes said, but a dozen were idled onshore. Its latest tally is 2% higher than a month ago but down 4% from the year-earlier level.
Canaccord Genuity analysts noted that the drop ended a five-week streak of gains in which gas-directed drilling increased by 44 rigs, adding, “Still, the gas rig count remains in positive territory on a year-to-date basis despite the moribund price environment. Smith rig data largely corroborates the changes in the Baker count as gas-dominant areas like the Marcellus and Barnett [shales] led the shale rig count down last week. We note the Haynesville Shale bucked the downward trend with two rigs added, which takes the play’s rig count back up to [around] 110 rigs.
“Many market bulls were expecting a big rollover in Haynesville drilling in [the second half of 2011] would finally lead to a decline in onshore U.S. gas supply. Unfortunately, Haynesville drilling has been much more buoyant than many expected as the rig count is essentially unchanged since mid-year. The resiliency in drilling along with generally better-than-expected well performance suggests the Hayesville Shale will not be the saving grace for the gas complex as some had hoped for earlier this year.”
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