Physical natural gas prices tumbled 8 cents overall in Wednesday’s trading as traders prepared for the Independence Day holiday, and many sections of the country expected to see mild weather. Nearly all points were in the red, and Northeast points bucked the downtrend, but a couple of points in the Marcellus suffered losses of over a dollar or more.
Meanwhile, the Energy Information Administration (EIA), in a holiday rescheduling, reported natural gas inventories rose 72 Bcf for the week ending June 28, about what the market expected.
Futures traders bid the market up anyway, with August settling higher, up 3.6 cents to $3.690, and September gaining 3.8 cents to $3.689. August crude oil continued its romp higher adding $1.64 to $101.24/bbl.
Northeast points rose as weather forecasts called for above normal temperatures. According to AccuWeather.com, Boston’s high of 87 Wednesday was expected to rise to 92 on July 4th and to 93 on Friday. The normal high in Boston this time of year is 80. Hartford, CT’s 87 high on Wednesday was forecast to reach 89 on Thursday and 93 on Friday. In New Haven, CT, the Wednesday high of 84 was anticipated to hold for Thursday and then reach 87 Friday. The normal high in New Haven is 82.
Quotes on Algonquin Citygate for Thursday and Friday delivery gained 47 cents to $4.50, and on Iroquois Waddington gas was 6 cents higher at $4.08. Deliveries on Tennessee Zone 6 200 L rose 29 cents to $4.30.
Points farther south saw prices decline as load-killing rain and moisture was expected to wind its way north from the Gulf of Mexico.
“A plume of moisture surging northward from the Gulf of Mexico and Caribbean Sea will bring widespread tropical downpours to a large part of the Southeast on Wednesday, the Fourth of July and right through the weekend,” said AccuWeather.com meterologist Anthony Sagliani. Cities with the highest potential for flooding “on multiple days through the weekend” include Tampa and Tallahassee, FL; Atlanta; Birmingham, AL.; Greenville, SC; Knoxville, TN; London, KY; and Charleston, WV.
Gas on Dominion came in 9 cents lower at $3.08, and gas to Tetco M-3 for Thursday and Friday were quoted 11 cents lower at $3.40. Gas headed for New York City on Transco Zone 6 was seen about 5 cents lower at $3.67.
Points in the Marcellus suffered triple digit declines as moderating weather and pipeline outages and maintenance limited delivery opportunities.
Gas on Tennessee Zone 4 Marcellus plunged $1.36 to $1.08 after trading as low as 50 cents and deliveries to Transco Leidy dropped $1.29 to $1.44 but not before changing hands at 40 cents. On its website, Transco reported planned outages and maintenance this month at various locations on the Leidy line. Tennessee reported curtailments for Marcellus points 245, 314, 316, and also Mahwah and Rivervale.
The curtailments happened at the same time a year ago, according to NGI’s Shale Daily, which said at the time, “The capacity constraint-induced price distortion started happening in earnest in Tennessee’s northeastern Zones 4, 5, and 6 after the Fourth of July weekend as production continues to grow from the play.”
Out West, gas for Thursday and Friday eased as recent record heat was expected take a break over the holiday weekend. “The record heat wave going on across the West will ease across many locations by the holiday weekend. However, the relief is only temporary as another round of extreme heat is expected by early next week,” said AccuWeather.com meteorologist Brian Edwards. “The large bubble of hot air in place across the West will be shunted to the south as a dip in the jet stream moves into the Pacific Northwest Thursday and Friday.”
At the PG&E Citygates, gas was quoted 4 cents lower at $3.78, and Thursday and Friday packages at the SoCal Citygates fell 6 cents to $3.88. At the SoCal Border, gas was 13 cents lower at $3.78 and on El Paso S Mainline gas for Thursday and Friday changed hands at $3.85, 14 cents lower.
Ahead of Wednesday’s inventory report, Citi Futures Perspective’s Tim Evans said, “Tuesday’s gain was only the second back-to-back advance since mid-June,” and “it looked increasingly as though the market had its legs back under it following the slide of the past two weeks. The market seemed newly confident that the [EIA] storage data for the week ended June 28…won’t undermine support…” He said most surveys pegged the storage report at about 70 Bcf, and his model showed a supportive 67 Bcf injection.
Other estimates were a little more bearish. Ritterbusch and Associates calculated a 73 Bcf build, and Houston-based IAF Advisors was looking for an increase of 75 Bcf. A Reuters poll of 18 traders and analysts showed an average 71 Bcf injection with a range of 51-80 Bcf.
The actual 72 Bcf addition was inline with the five-year average build for the week of 71 Bcf, but well above last year’s date-adjusted injection of 42 Bcf.
“We were looking for a number between 71 Bcf to 74 Bcf, and the market seems to be just drifting without a lot of intention,” said a New York floor trader. “With the long holiday weekend coming up people have been more concerned with their Fourth of July plans.”
It may not have been enough to move the market into positive territory, but “when we consider that there was some fairly intense heat in the week ended June 28 and yet it only translated into neutral storage data, it does suggest that it will take even more extraordinary weather to produce a bullish result,” Evans said following the report. “So while the data was as expected, we see some modest bearish implications for the weeks to come.”
Inventories now stand at 2,605 Bcf and are 491 Bcf less than last year at this time and 30 Bcf below the five-year average. In the East Region 48 Bcf was injected and in the West Region 10 Bcf was input. Inventories in the Producing Region increased by 14 Bcf.
The Producing region salt cavern storage figure increased by 2 Bcf from the previous week to 265 Bcf, while the nonsalt cavern figure rose by 12 Bcf to 706 Bcf. The EIA first split Producing Region facility types in storage report footnotes in March 2012 in an effort to give analysts and industry more comprehensive information on the relationship between natural gas inventory changes and types of storage facilities (see Daily GPI, March 26, 2012).
Weather forecasts are showing near-term warmth in major energy markets. MDA Weather Services in its Wednesday morning six-to 10-day outlook showed a ridge of below-normal temperatures centered over Nebraska and South Dakota. Above-to-much-above normal temperatures were expected over the Mountain West and Pacific Coast, as well as New England, the Mid-Atlantic and Ohio Valley.
“The period starts the same to slightly hotter in the Northeast but also ends a bit cooler over the same area, limiting the net change today. Widespread lows to possibly mid-90s are anticipated early from the Mid-Atlantic to New England, where ridging overhead will combine with westerly surface flow to boost temps. Changes were generally small elsewhere as well, with the large-scale themes of warmth in the West and seasonal conditions through the Central and Southern U.S. still holding on. Though details vary among guidance, the big picture is still well supported overall.”
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