Physical natural gas fell all of a half cent on average Thursday as traders got most deals done prior to the Energy Information Administration (EIA) report on natural gas inventories.
New England points fell about a nickel, and California locations weakened a couple of pennies, but most trading points were within a cent of unchanged. The EIA reported a build of 88 Bcf, slightly more than what traders were expecting, and prices made an early run lower. Futures traders decided that the report was not as bearish as it seemed initially, and prices managed to climb into the plus column by the close of trading. At settlement, June was 0.5 cent higher at $3.983 and July had added 0.3 cent to $4.033. June crude oil fell 23 cents to $96.39/bbl.
A Northeast marketer attributed the weak prices to a lack of weather and no increased demand for gas to fuel power generation units. “There’s skinny demand everywhere. There’s not demand for gas anywhere, and one of my bigger buyers in New York pulled out.
“A lot of people are doing maintenance. This is the time of year you bring things down, clean them up for the winter and getting them ready for the summer so you don’t have any problems. Things should get a little colder, and hopefully things will pick up a little bit,” he said.
Power prices actually gained at northeast points. Next-day peak power at the New England Power Pool’s Massachusetts Hub rose $1.15 to $47.82/MWh, and at the PJM West Hub next-day peak power added $9.36 to $54.24/MWh.
On Algonquin Citygates gas for delivery Friday fell by 2 cents to $4.16, and at Iroquois Waddington gas was seen at $4.48, down 5 cents. On Tennessee Zone 6 200 L, next-day gas changed hands at $4.18, 3 cents lower.
Next-day deliveries were steady to slightly higher at eastern points. Deliveries on Dominion rose 2 cents to $3.96, and at Tetco M-3 next day gas was quoted at $4.04, up 2 cents. Gas bound for New York City on Transco Zone 6 was unchanged at $4.04.
Next-day quotes at Midcontinent points feeding Midwest markets held steady as weather forecasts were mostly temperate. Wunderground.com reported that the high in Chicago Thursday of 72 was expected to drop to 57 on Friday before rising to 63 on Monday. The normal high in Chicago is 68. Kansas City’s Friday high of 75 was anticipated to slide to 66 Friday before advancing to 79 on Monday. The normal high in Kansas City is 73. In St. Louis the high Thursday of 77 was seen falling to 72 Friday and 68 Monday. The seasonal high in St. Louis is 74.
Friday deliveries into Northern Natural Gas Ventura were up a cent at $3.92, and at Demarcation gas was quoted at $3.91, unchanged. Deliveries to NGPL Midcontinent Pool were also flat at $3.83. On ANR SW, Friday packages were seen at $3.84, 2 cents lower, and gas on Panhandle Eastern was flat at $3.76.
On the West Coast, quotes were mostly weaker. Deliveries Friday to the PG&E Citygates fell 2 cents to $4.03, and at the SoCal Citygate gas was quoted at $4.09, down a cent. Deliveries to the SoCal Border fell 2 cents to $3.91, and on El Paso S Mainline next-day deliveries were flat at $3.97.
Inventories now stand at 1,865 Bcf and are 737 Bcf lower than last year at this time and 99 Bcf below the five-year average as well, EIA said in its weekly storage report.
Prior to the release of storage data, analysts were still scratching their heads about last week’s big miss on the estimation of the storage report. Not one analyst came close to estimating the 43 Bcf build. “The 43 Bcf build was around 12 Bcf higher than any market we saw last week,” said John Sodergreen, editor of Energy Metro Desk (EMD). “What’s up with the high build? One of the better rationalizations, however, had it that the 43 was right on the money, but that the proceeding two weeks were pure garbage. Hmm. This week we’re not necessarily reading a surprise, but, based on last week’s plus-10 Bcf misfire, we’d say there is a good possibility it may come in a little lower than the market.”
Traders were closer to the mark this time around. The EMD survey came in at 86 Bcf, and a similar Reuters poll of 24 traders and analysts revealed an average 83 Bcf. The Reuters survey had a range of 69-94 Bcf. Ritterbusch and Associates was looking for an increase of 88 Bcf and Bentek Energy, utilizing its flow model, forecast a build of 86 Bcf. Last year 30 Bcf was injected and the five-year average stands at 69 Bcf.
Addison Armstrong of Tradition Energy sees “expectations for an above-average storage injection and forecasts for mild temperatures in the coming weeks” keeping prices below the important $4 level. “Although gas prices rebounded yesterday [Wednesday] from their one-month low of $3.985 amidst light short-covering, expectations of limited seasonal demands and robust storage injections in the coming weeks prevented the market from pushing back above the key $4.00 mark,” he said in a morning note to clients.
Near-term weather outlooks are benign. “The forecast still features variability with both warming and cooling events, but not enough of either side to dominate the pattern and advance significant demand concerns,” said Matt Rogers in the Commodity Weather Group’s six- to 10-day outlook. “Two warm spikes target the East Coast tomorrow and late next week, [and] a transient cool push could be stronger early next week too. But the West sees stronger and more frequent heat concerns, including the Southwest, California, and especially the interior Pacific Northwest.
“The models are debating the degree of Midwest warming in the six-10 day with the American side leaning cooler especially toward Ohio. The 11-15 day is very quiet overall.”
The Producing region salt cavern storage figure increased by 14 Bcf from the previous week to 212 Bcf, while the non-salt cavern figure rose by 17 Bcf to 553 Bcf, EIA said. The EIA first split Producing Region facility types in storage report footnotes in March 2012 in an effort to provide more comprehensive information on the relationship between inventory changes and types of storage facilities (see Daily GPI, March 26, 2012).
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