The cash market overall rose an average 21 cents Monday boosted by a combination of pipeline outages, forecasts for searing heat, and Gulf shut-ins prompted by tropical storm activity. Northeast points shot higher as milder weather enabled pipelines to reinstate earlier restrictions. At the close of futures trading July natural gas gained 6.9 cents to $2.694 and August added 6.6 cents to $2.734. August crude oil shed 55 cents to $79.21/bbl.
Milder weather in New England curiously led to higher quotes at Northeast points. “Tennessee started their restrictions today [Monday], which had been in effect since last Monday. The hot weather in the [New England] area forced them to let the gas flow last week, but now that conditions have moderated, they have started to work on Station 261, so there has been a lot more gas restricted than there has been in the last 4 to 5 days,” said an eastern marketer.
Temperatures at major cities in the East were expected to be at or below seasonal norms. Forecaster AccuWeather.com said Monday’s high pf 73 degrees in Boston would drop to 68 on Tuesday before climbing back to 74 on Wednesday. The normal high for Boston this time of year is 79. New York’s Monday high of 74 was forecast to hold steady through Tuesday before rising to 83 on Wednesday. In Philadelphia Monday’s high of 85 was anticipated to dip to 76 on Tuesday before jumping back to 86 on Wednesday. The normal high this time of year in New York is 82 and in Philadelphia the seasonal high is 85.
Quotes on Algonquin jumped almost a dollar, and gas deliveries to Iroquois was up close to a quarter. Tennessee Zone 6 200 L added nearly $1.10.
Points further south rose less. Tetco M-3 rose just over 20 cents and deliveries to Transco Zone 6 New York were up a few cents less.
Searing heat was forecast for points in Texas as far north as Denver. “The worst heat wave of the summer so far is just starting to cook over the Plains this week,” said AccuWeather.com meteorologist Alex Sosnowski.
“The heat wave will eclipse the magnitude and coverage area of last week’s heat wave in the Northeast [and] actual temperatures in many cities from Houston, San Antonio and Dallas to Oklahoma City, Denver, Kansas City, Wichita and Omaha will reach triple-digit readings.”
He added that the combination of extreme actual temperatures, intense June sunshine, humidity levels and wind would contribute to heat indexes much higher.
Next-day prices in the Midcontinent surged but couldn’t match the price feats of northeast points. Deliveries on ANR SW added about a quarter and NGPL Mid-Continent Pool rose almost as much. Panhandle Eastern and NGPL TX-OK were also about a quarter higher and Oklahoma Gas Transmission was up almost 20 cents.
On the West Coast price gains were more subdued. PG&E Citygate added more than a dime while Malin was higher by less than 10 cents. At SoCal Citygate and SoCal Border Tuesday deliveries were close to 15 cents higher.
Futures traders were factoring in Tropical Storm Debby as well as expected heat. At 5 p.m. EDT The National Weather Service (NWS) reported that Tropical Storm Debby was situated about 30 miles south-southwest of Apalachicola, FL (see related story).
According to a Reuters report most computer models show Debby steering toward the northern Florida coast and then across part of the Southeast. The system was not considered strong enough to do any significant damage to offshore infrastructure.
Oil and gas producers evacuated workers from platforms and shut in production on Saturday. The Gulf is supplier of 20% of U.S. oil production and 6% of natural gas output.
The U.S. Bureau of Safety and Environmental Enforcement, which oversees oil and gas activity in the Gulf, said earlier on Saturday that 7.8% of daily oil output and 8.16% of daily natural gas output were shut down.
Tim Evans of Citi Futures Perspective said that Debby “will be little more than a rain event when it eventually makes landfall. The actual impact on the natural gas market may be mixed-some minor production losses offshore, and some lost demand once it is onshore. For offshore workers and traders alike, we see this as more of a useful drill than a live exercise.”
Before the open top traders were looking for the market to break through resistance. “The market continues to test short-term resistance at $2.67 and continued declines in natural gas rig counts coupled with increasing cooling demand could push prices through the levels,” says Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm. “On a trading basis, we will continue to hold current positions.”
DeVooght is currently advising trading and end users to stand aside and producers and those with exposure to lower prices should hold on to October $2.50 put options structured to cover the summer strip at a debit of 25 to 27 cents.
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