Natural gas deliveries for Thursday added 4 cents on average nationally in Wednesday’s trading, with ongoing warm temperatures in the Midwest keeping buyers busy and next-day deliveries up by a nickel or more.
Firm West Coast power kept a bid under California deliveries, and next-day deliveries were seen more than a nickel higher as well. At the close of futures trading the expired September contract had added 3.3 cents to $3.567, courtesy of a last minute surge, and October inched higher by 0.9 cent to $3.582. October crude oil traded at the highest levels in two years, up $1.09 to $110.10/bbl.
A Midwest utility buyer reported a sharp increase in gas usage driven by the recent heat wave that is baking the Upper Midwest. “Our power customers have been taking almost as much as the City of Omaha and they have been taking about 25,000 Dt/d. Total we are at about 55,000 Dt,” the buyer said. “The heat looks like it will hold through Saturday. We’ve had quite the heat wave. It came in and looks like it will [last] for about 10 days.”
The buyer added that the utility doesn’t expect increased power generation volumes to impact September baseload volumes because “they gave us an amount they said they would use and we get our baseload in line including them. It’s only hot for the first couple of weeks in September and then it starts moving into fall weather. We had to reduce our storage injections on those days when their usage increased, and the last couple of days we have taken gas out of storage. My storage plan is intact, because it looks like prices will be 20 cents cheaper, so I will just wait. Once I saw that prices were going to be down, I didn’t worry much about getting my August allotments.”
That heat may last a few days more before finally giving in. “A brutal heat wave in progress over the Central states since last weekend will break down over the Labor Day weekend, but there are more hot days to go in the late-summer pattern,” said AccuWeather.com meteorologist Alex Sosnowski. “Temperatures will surge well into the 90s most days through Saturday.
“A few spots will reach the century mark. The heat wave that has closed some schools and canceled fall activities during the first week of the new semester will shrink toward the Southwest during the Labor Day weekend, [but] a cool front will sweep from northwest to southeast, from the northern Plains to the Midwest spanning Saturday night, Sunday and Labor Day.”
AccuWeather.com predicted that Wednesday’s high in Minneapolis of 92 would ease to 90 on Thursday and to 89 on Friday. The normal high in Minneapolis is 79. Omaha’s scorching high of 99 on Wednesday was anticipated to hold through Thursday before hitting 100 on Friday. The seasonal high in Omaha is 84. Kansas City’s 95 high on Wednesday was forecast to rise to 99 Thursday and 101 on Friday. The seasonal norm for Kansas City is 87.
Quotes on Alliance were seen 5 cents higher at $3.77, and deliveries to the Chicago Citygates added 7 cents to $3.74. On Northern Natural Gas Ventura, Thursday parcels were seen at $3.70, up 4 cents, and at Demarcation gas for Thursday changed hands at $3.69, also up 4 cents. Deliveries to the NGPL Midcontinent Pool rose 6 cents to $3.51.
On the West Coast, elevated power demand and resultant firm next-day power prices helped boost quotes for next-day gas. The California Independent System Operator predicted peak load Wednesday of a stout 41,578 MW would rise Thursday to 41,977 MW.
At the IntercontinentalExchange peak power for delivery Thursday to SP-15 rose $1.31 to $54.47/MWh, and peak power at NP-15 rose by 98 cents to $49.73/MWh.
Gas at Malin increased by 5 cents to $3.52, while deliveries to the PG&E Citygates added about 6 cents to $3.92. At the SoCal Citygatesm next-day deliveries were quoted at $3.82, 6 cents higher, and prices at the SoCal Border for Thursday was seen at $3.76, up 6 cents. Quotes for gas on El Paso S Mainline also were 6 cents higher at $3.81.
Traders Thursday will be expecting government storage figures to fall in line with both the one-year and five-year averages. A year ago 64 Bcf was injected, and the five-year average stands at 66 Bcf. Ritterbusch and Associates is looking for a 67 Bcf build, and Bentek Energy predicts at 62 Bcf increase. A Reuters poll of 24 analysts showed a range of 54 Bcf to 70 Bcf, with an average of 63 Bcf.
Weather forecasts moderated overnight. Commodity Weather Group in its Wednesday morning six- to 10-day outlook predicts less warming across previously well above normal occurrences in the Midwest.
“The big story this morning is that instead of rebounding, another surge of warming into the Midwest later next week behind a transient cool push, the pattern stays on the cooler side overall on the guidance consensus, leading the way to more significant cooler changes for the Midwest and East through the six-15 day,” said CWG President Matt Rogers.
“There is still likely to be some variability, but this current week seems to be the last of the warmer-to-hotter summer-like pattern situations for those areas. The heat ridge shifts west, but it also lingers over the South-Central U.S. to give Texas some hotter risks (especially interior including Dallas). California and the rest of the West see hotter risks with this pattern realignment.”
Tim Evans of Citi Futures Perspective said he had updated his projections for the five-year storage surplus. For Thursday’s storage report he predicts a fill of 67 Bcf, right at the industry consensus, and sees a diminishing five-year surplus down to 20 Bcf by Sept. 13. “In terms of the larger picture however, it’s not clear this supportive short-term storage trend will persist through September and we remain concerned that the faster pace of seasonal injections in late September and early October could tip the market lower for a retest of the $3.13/MMBtu early August low.”
Tom Saal in his work with Market Profile suggests that the expiring September contract will test Tuesday’s value area at $3.531-3.475. He anticipates that the range on September trading will focus on minus development between $3.580 and $3.460.
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