“Where’s the weather?” That question must have been on a good many traders’ minds Friday as prices crashed and burned at almost all points. Besides moderate conditions dominating the weather picture almost everywhere, the cash market was negatively influenced by Thursday’s 24.7-cent screen drop and the loss of industrial load that accompanies a weekend market.
The above-expectations storage report Thursday, which increased the year-on-five-year average surplus, undoubtedly also had a bearish impact on Friday’s market.
Several points in the Midcontinent and West recorded triple-digit declines amid an overall market that fell anywhere from about a nickel (Southern Star Central) to nearly $2 (Southern California border). Only CenterPoint’s East and West pools avoided the general price carnage with dollar-plus rebounds, but they had already seen their own swan dives a day earlier when CenterPoint-East traded as low as $1.18.
The CenterPoint rally carried the pool averages back to nearly $3.10 (West) and about $2.85 (East), which was in great contrast to some other Midcontinent points that were averaging less than $2.
Strength at Northern Natural’s demarcation and Ventura points had been defying Midcontinent softness since Tuesday because of cold weather in the pipeline’s Upper Midwest market area. The pipeline’s bulletin board helped explain why that changed Friday: a posting projected that the system-weighted temperature of about 51 degrees Friday would be rising to 58 Saturday, 61 Sunday and 63 Monday.
A number of pipes were appealing to customers Friday not to bank gas on their systems during the weekend because of nearly universal high linepack and/or near-full storage. Northwest even told shippers it was OK to “draft slightly” (see Transportation Notes). And Southern said it was “too close to call” on whether it would issue a Type 6 OFO for Saturday or Sunday.
Tennessee estimated its systemwide working storage inventory through Thursday at about 74.5 Bcf, or about 83% of working capacity, and said that of the total, its Northern storage facilities were about 95% full. Temperatures in its market and supply areas are “forecasted to be normal to slightly warmer for this time of the year over the next week,” Tennessee said.
The Southern California border, into both the SoCalGas and PG&E systems, saw the day’s biggest losses in the $1.90s as PG&E ended a low-inventory OFO. Inland California, which had recently been supporting prices in the Golden State with hot weather, was seeing nearly all power generation demand disappear with highs not expected to get above the 70-degree area Saturday.
Border quotes into SoCalGas sank as low as $2.75, but that was nowhere close to the point’s all-time low, which was $1.22 on the trade date of Nov. 16, 2001 (perhaps not coincidentally a Friday).
What The Weather Channel (TWC) called a “vigorous Pacific storm and cold front” would be moving through the West over the weekend, and snow was forecast for some of the region’s elevated mountain locations. Even Phoenix was backing off significantly from recent highs in the low 100s, with a peak of 90 forecast for Saturday.
Much of the Midwest was entering a warming period from recent highs in the 50s and 60s, although Saturday morning lows would be in the upper 20s and low 30s across northern Minnesota and in the lower 30s across much of Wisconsin and Michigan, TWC said. Frost and light freeze warnings would cover a large area, it added. The Northeast also would be pretty chilly, with some frost possible in upstate New York and interior New England, TWC said. However, it was obvious that any heating load in both regions wasn’t substantial enough to prevent big price losses Friday.
The South and Midcontinent still had highs in the 80s in their forecasts, but that wasn’t enough to activate many gas-fired peaking generation units.
Minerals Management Service (MMS) said 63 companies reported 3,303 MMcf/d in remaining Gulf of Mexico production outages Friday, down 110 MMcf/d from a day earlier. Crude oil shut-ins fell to 626,045 b/d, MMS said, while its tally of evacuated platforms and mobile drilling rigs was unchanged at 116 and one, respectively (see related story).
Although there is still time for more hurricanes in the current season, with WSI Corp. predicting another three (see Daily GPI, Oct. 1), it should be noted that the late-season storms tend to steer clear of the GOM more often than not.
Citi Futures Perspective analyst Tim Evans calculated that as of Thursday cumulative production losses resulting from hurricanes Gustav and Ike totaled 179.6 Bcf.
“I’m getting cut [on nominations] everywhere” because of stuffed-to-the-gills pipelines, lamented a Midcontinent producer. There’s just no place for gas to go, he added. His company still had some markets available for the weekend but couldn’t find the transport capacity needed to get supplies to them. He could only assume that CenterPoint rebounded Friday because some pipeline capacity opened up that wasn’t there Thursday.
The producer said he couldn’t tell whether the bailout bill for financial markets, passed by the House and signed by President Bush Friday (see related story) will help solve counterparty credit problems in the energy industry. His company still has five or six bank-owned trading operations that it’s not allowed to deal with, he said.
A marketer in the Upper Midwest said a hard frost was due in her area Friday night, but daytime temperatures would reach the low 70s in the coming week. She confessed that she “had to break down this morning [Friday] and turn on the furnace just a little bit.” She noted that it’s the time of year when forecasts of above-normal temperatures mean “comfortable” in most cases; just a month or so earlier it still meant greater cooling load.
The marketer didn’t think producers should regret the current market softness too much because “they’ve had a good run of higher prices.”
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