Virtually all points fell Wednesday following a string of July futures gains having come to an end a day earlier. Declines of power generation demand for air conditioning in some areas also contributed to the cash softness.
An increase of about a quarter by the Florida citygate (which pushed the average over $7), where peak temperatures remaining in the low to mid 90s prompted Florida Gas Transmission to keep an Overage Alert Day going into the start of its second week, was the sole exception to the overall downturn. Otherwise, losses ranged from a little less than a dime to a little more than a quarter.
Weather will remain mild to cool for the most part in Canada and northern U.S. markets, and even much of Texas was cooling off into the 80s, although the mid 90s will become the norm again in the Lone Star state over the weekend.
Most of the largest declines were concentrated in the U.S. West and Midcontinent, which suggested that the second Texas pipeline explosion in as many days had essentially no supportive impact on prices.
Following a Monday blast near Cleburne in North Texas on a segment of a pipe partially owned by Enterprise Products Partners that killed one person (see Daily GPI, June 9a), two more died Tuesday at a Lipscomb County explosion in the Texas Panhandle near the Oklahoma border. According to Bloomberg BusinessWeek, the DCP Midstream Partners LP-owned pipe was a 14-inch diameter gathering line that had been shut in. In both cases, third-party workers were reported to have been responsible for puncturing the pipes.
PG&E had some role in overall western price weakness when it declared a high-inventory OFO for Thursday (see Transportation Notes).
Cash traders will again have negative screen guidance Thursday after the prompt-month gas contract dropped another 13.1 cents Wednesday (see related story) despite significant strength in the rest of Nymex’s energy futures complex.
The National Hurricane Center said Wednesday a tropical wave moving westward across the Windward Islands into the southeastern Caribbean Sea was producing showers and gusty winds, but had nearly zero chance of additional development.
Sources continued to discount the recent spate of negative developments in the oil and gas industry (see Daily GPI, June 9b) as having material impact on gas price strength in the last couple of weeks, although there was the potential for loss of production involved. “I think the news will contribute to the rally for a brief period,” said Bentek Energy analyst Rocco Canonica. “It’s June, which is a good time for rallies like this one. But as we get closer to fall or perhaps even sooner, the market is going to come to the realization that there is enough, or more than enough, gas to manage a cold winter and prices will come back down.”
A Midcontinent producer also had doubts about the gas well and pipeline explosions, along with the big Gulf of Mexico oil leak, being a major instigator of higher gas prices. “I think it’s a number of things: 1) weather beginning to warm in populated regions, so [there’s] increased demand; 2) weekly storage inventory reports have been lower than expected in the last two to three weeks; and 3) the Gulf BP rig blowout is certainly helping to bring focus back onto the natural gas market, but more long term technical shorts are finally coming out of some of their positions [in the futures market],” he said.
After posting one six- to 10-day forecast for the June 14-18 workweek Tuesday afternoon, the National Weather Service later revised it to extend its prediction of above-normal temperatures in the U.S. to all but the southern end of the Florida peninsula and from the Midwest in extreme northern Minnesota and along the western edges of Wisconsin and Illinois through the Mid-Atlantic and most of the Northeast. It expected normal readings in nearly all of that area, with only Maine, most of New Hampshire and northeastern Vermont due to experience below-normal conditions.
Analyst Teri Viswanath of Credit Suisse said she expects a 99 Bcf storage injection to be reported for the week ending June 4. “While our estimate appears to be slightly higher than initial market expectations, we think that comparisons with last year’s 124 Bcf build might dampen the potential for a sell-off this week,” Viswanath added. Referring to whether electricity demand might limit storage injections this summer, she said much higher gas prices this summer might allow coal-fired generation to recapture market share, which would limit incremental gas demand.
Citi Futures Perspective’s Tim Evan predicted a significantly lower addition of 90 Bcf for last week, to be followed by injections of 80 Bcf and 85 Bcf for the weeks ending June 11 and June 18, respectively.
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