A couple of western upticks notwithstanding, the overall cash market responded to persistently weak weather fundamentals, prior-day energy futures declines and correct expectations of a bearish storage injection report with price declines ranging from a little less than a nickel to about 30 cents. A considerable majority of the drops were in double digits.
Most western points were among Thursday’s weakest as excess supply issues, including high-linepack OFOs by both of California’s major distributors (see Transportation Notes), continued to weigh on regional pricing.
However, as expected (see Daily GPI, May 19), the scheduled end Friday of a two-day total outage of Northwest’s Moab (UT) Compressor Station allowed Northwest-South of Green River to climb out of the ultradeep price hole it had dug the day before. The pipeline segment recovered all of Wednesday’s dollar-and-a-half loss and more, rebounding a little more than $1.70 as supply that had been pent up by the outage began to find a home again. Questar, indirectly impacted by the Northwest constraint and also weaker in comparison with other Rockies pipes in the last couple of days, managed a small gain.
Cooling load will be fairly strong Friday from the upper Midcontinent through Texas and the desert Southwest, where an excessive heat watch was posted for southwestern Arizona. A record-breaking 107-degree high is forecast for the Phoenix area, according to The Weather Channel, and Houston is due to see peak temperatures around 90 from Friday through Monday. But otherwise the weather outlook has little to no support for gas prices.
Traders’ bearish anticipations for the storage report were satisfied when the Energy Information Administration reported an injection of 90 Bcf for the week ending May 13. Although within the range of expectations, the volume was near the high end. However, the Nymex response was somewhat muted in taking the June contract only 3.5 cents lower on the day. Despite a crude oil loss of 33 cents to a little less than $47/bbl, substantive gains in heating oil and unleaded gasoline futures may have stemmed further declines in natural gas, one source suggested.
Citigroup analyst Kyle Cooper had this commentary on the report: “While maybe there might be some tightness this summer, there is none now. If the same injection to temperature relationship holds true in coming weeks, a number of injections above 100 Bcf are very likely. Based on the last two weeks, very high injections are forecast through the end of May and into early June.”
A couple of traders agreed that the cash market appears to be in a doldrums period, using the adjectives “listless” and “lackluster.” Northeast prices came off on cooler than normal weather, which was not enough for appreciable heating load, said a regional marketer. There also was little power generation demand, he found. He expects price declines to continue Friday, although he thinks they will be no more than moderate.
A Gulf Coast producer expressed surprise that the screen didn’t fall any further than it did following what he considered a very bearish storage report. He noted that although Florida Gas Transmission did not repeat Wednesday’s caution about a potential Overage Alert Day notice, FGT Zone 2 numbers showed the greatest resilience among Gulf Coast points in only dipping about 3 cents.
The producer said he is already doing some June deals, having sold Columbia Gulf onshore at basis of minus 3.5 cents. Many others likely share his opinion that practically nothing will be left to done in bidweek business after Memorial Day weekend other than some possible emergency supply tweaking.
A western trader said he believes that the region’s utilities will be holding back during bidweek in the expectation that June prices will be falling. He said the Southern California border is being offered at the NGI index flat, while San Juan gas is at a slight discount to index. He was hearing San Juan bids at index minus a penny.
A trader said he was hearing no industry talk about Tropical Storm Adrian, which was upgraded to a minimal hurricane Thursday. The Pacific hurricane season is already under way (the Atlantic season doesn’t officially begin until June 1), and Adrian was in the eastern Pacific headed northeastward toward Central America. Normally Pacific storms move westward over the ocean, but early season conditions occasionally allow one to cross from the Pacific into the Atlantic basin. Adrian was expected to cross over into the southwestern Caribbean Sea overnight in the vicinity of Guatemala and El Salvador, but was likely to be badly weakened by the mountainous land terrain and pose virtually no threat to Gulf of Mexico production.
The Weather 2000 consulting firm commented, “Most people do not start paying attention to the hurricane season until August, and recent years validate this somewhat. Since 1996 the earliest an Atlantic hurricane has formed is July 7th with most waiting at least until August. This year has the makings of [a] quick start, so we advise that you keep your eyes and ears to the Atlantic, Caribbean and Gulf…for developments even before the official season start on June 1st.”
©Copyright 2005Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |