A few flat to about a dime higher locations in the Rockies (and ANR ML7 in the Midwest) avoided mostly moderate softness in the rest of the market Wednesday. Some pullback in heat levels across the southern United States and Rockies, along with continuing mildness in the northern market areas, combined with the previous day’s 10.9-cent drop by August futures to depress most cash locations.
Losses ranged from 2-3 cents to about a quarter; most were less than a dime.
Further losses are likely to spread to all points Thursday after the screen dropped another 4 cents Wednesday (see related story) and the extra loss of industrial and other load associated with a long holiday come into play.
Temperatures were forecast to be rising Thursday in the Midwest and New England while retreating slightly in the lower Northeast, but with both major market areas peaking only in the 70s, neither was making any substantive contribution to overall cooling load.
Highs are still torrid from the mid 90s to mid 100s in the south-central and southwestern U.S., but that reflects a retreat from the previous week in which both regions were regularly reaching the 100 area or higher. High predictions tend to get a bit lower traversing eastward across the South, with such cities as Atlanta and Birmingham, AL, expected to reach only the “merely hot” 90-degree vicinity.
The Rockies is cooling off to a great extent from last week, but the Pacific Northwest is partially stepping in as a cooling demand replacement with highs in the mid 80s in Seattle and low 90s in Portland, OR, predicted for Tuesday. Inland California also remains hot, while mild to cool conditions continue to prevail in much of the West.
Assessments of the early market impact by new Rockies Express (REX) service into Ohio remain murky because of the mild Midwest and Northeast weather. They were also complicated by Panhandle Eastern and Trunkline announcing that operational issues would require them to limit deliveries at their respective REX-East interconnects (see Transportation Notes).
A Rockies producer said there was no doubt that REX-East is displacing Gulf Coast gas to some extent and having the anticipated effect of strengthening prices in his region. He regularly tracks CIG basis (the Henry Hub price minus the CIG price) and said while CIG stood at minus $1.53 as of June 26, the spread had tightened to 85 cents earlier this week.
However, he said it was impossible for the pipeline operators to tie in 1.5 Bcf/d of REX-East capacity so quickly after startup, and until northern weather starts providing a real test, “let’s take a time-out for now” on making a call on REX-East market impact.
Although Wednesday’s gains in the region were smaller than on Tuesday, the producer said it looks like REX is helping to keep Rockies spot prices a little better supported this week than in the general market. He didn’t think transport constraints were enough to explain the modest Rockies firmness.
The National Weather Service (NWS) predicts below-normal temperatures during the July 6-10 workweek in the northeastern U.S. to as far south as southern Virginia and as far west as Lake Michigan and northeastern Indiana. In its six- to 10-day forecast posted Tuesday afternoon, the agency also looks for below-normal readings everywhere west of a line running northeastward from the southeast corner of Arizona to eastern Colorado and the turns north into the extreme southeast corner of Wyoming. At its northern end the below-normal area also extends through most of the Dakotas into western Minnesota. NWS expects most of the South to see above-normal temperatures, with such conditions south of a line from southeast New Mexico into most of Kansas and Missouri before curving back to the southeast through Tennessee and Georgia into most of peninsular Florida.
SunTrust Robinson Humphrey analyst Cameron Horwitz said he expects a 74 Bcf storage injection to be reported Thursday for the week ending June 26. Tim Evans of Citi Futures Perspective is looking for a considerably larger build of 85 Bcf for that week, to be followed by growing injections of 90 Bcf and 93 Bcf in the weeks ending July 3 and July 10, respectively.
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