Even with hotter weather spreading into the Northeast, prices continued to fall at all but a few points Wednesday. The previous day’s futures drop of 5.4 cents and growing concerns about soaring storage inventories portending limited options for placing spot gas down the road were believed to be the market’s chief bearish influences.
Also, Midwest heat that had been reaching the 90s through Wednesday will be retreating into the 80s Thursday, according to Madison, WI-based Weather Central. In addition, interior California will be cooling off to a similar extent.
Negative futures guidance for the cash market will continue Thursday after the July natural gas contract dropped another 11.8 cents Wednesday (see related story).
Highs from the mid 90s to the mid 100s will remain in effect Thursday from the midsection of the South through the Midcontinent into the Southwest, and even such Northeast points as New York City are predicted to begin reaching the high 80s. However, cooling load will diminish moderately in the Midwest and remains a bit on the low side in sections of the eastern South, with Atlanta expected to reach only 91 Thursday, Weather Central said.
PG&E’s expansion of a customer-specific high-inventory OFO into a systemwide one (see Transportation Notes) had relatively modest market impact, as both Malin and the PG&E citygate fell only about a nickel each.
Appearances could be a bit deceiving. Forecasts of high temperatures in the vicinity of 100 degrees in much of Texas might have indicated heavy power generation load for gas to many people, yet spot volumes of 624,600 MMBtu/d and 664,500 MMBtu/d traded Tuesday on IntercontinentalExchange (ICE) at Katy and the Houston Ship Channel, respectively, dropped to 531,000 MMBtu/d and 655,200 MMBtu/d Wednesday. On the other hand, Waha numbers on ICE rose from 155,800 MMBtu/d Tuesday to 167,900 MMBtu/d Wednesday.
Referring to the searing heat currently occupying the south-central U.S., a Gulf Coast trader observed, “You get to a certain point and it doesn’t matter.” Whether the high temperature is 101 or 98, “it’s still awfully hot,” she said. Summer has just barely arrived, and mercury levels are already surpassing 100 in much of Texas, she said.
But it’s obvious that cooling load is failing to prop up the gas market, the trader said. One reason is that the Northeast market area is only just now starting to warm up, she noted, and industrial load remains sluggish because of a depressed economy. And expectations of yet another storage report Thursday that could hit triple digits could further increase the spot market’s bearish mood, she added. That and the continuing weakness in futures Wednesday caused her to anticipate further moderate softness in the cash market Thursday.
The trader said her company was already finished with bidweek business Wednesday, indexing all deals with almost all of them at index flat. That was probably advantageous for her independent producer clients, she said, because July trading was looking “more like index minus” Wednesday. She noted indexed deals done Wednesday on ICE for NGPL-TexOk at minus 1.75 cents, for Southern at minus 0.25 cent and TGT Zone SL at minus 0.5 cent.
SunTrust Robinson Humphrey analyst Cameron Horwitz said he looks for a 99 Bcf storage injection to be reported for the week ending June 19. Tim Evans of Citi Futures Perspective expects a modestly higher volume of 103 Bcf, but then anticipates dwindling builds of 95 Bcf and 90 Bcf for the weeks ending June 26 and July 3, respectively.
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