Mild weather in Canada and the northern United States fails to halt the continuation of cash advance.
Only one flat location failed to participate in Tuesday’s further advance of the cash market, which in most cases was seeing increases get larger again following a modest slowdown on Monday.
Spot price upticks again were supported by prior-day futures strength, and peak temperatures remaining in the 90s across most of the southern half of the U.S. provided enough power generation load to make up for cool to relatively mild conditions that have established themselves recently in Canada and northern U.S. markets.
A large majority of the increases ranging from 2-3 cents to about half a dollar were in double digits. The Florida citygate, where an Overage Alert Day by Florida Gas Transmission had its imbalance tolerance tightened in its seventh day (see Transportation Notes), not only repeated as the market’s top gainer but remained well above all other points in averaging nearly $7.
Kern River reported low linepack systemwide Tuesday, but its price rise of about 15 cents was fairly modest in comparison with the rest of the market.
A string of recent gains by July futures finally ran out of steam as the prompt-month contract fell by 10.8 cents (see related story), casting some doubt on whether cash strength will be sustained Wednesday.
A Texas-based marketer said he expected cash to start a bit lower Wednesday after falling a bit in late deals Tuesday under the influence of futures going into the red after being higher temporarily. However, he also perceived a chance of physical prices being able to recover depending on forecasts for warmer weather going into the weekend. After all, most cash sales had been done early Tuesday, especially in the Northeast, he said.
The oil and gas industry certainly has seen quite a few bad news developments lately, such as Marcellus Shale gas well explosions in Pennsylvania and West Virginia, accompanied by concerns in Pennsylvania and New York over whether hydrofracing operations in shale drilling are polluting drinking water. And although believed to have been caused by a third party, the explosion Monday afternoon of an Enterprise Products Partners pipeline in North Texas (see related story) is estimated to be causing a 250 MMcf/d loss of transport capacity for an unknown period of time. Then there’s the infamous BP oil well leak in the Gulf, which is not directly gas-associated but is a black eye for oil and gas interests in general and the related moratorium on deepwater drilling may affect gas supplies down the road.
However, the marketer tended to discount how much these problems are related to recent gas price strength. “The changes we’re seeing now are not necessarily reflective of what might drive the market” later on, he said, adding that he believes most traders likely were looking at early hot weather in several regions combined with the continuing forecasts of an extra-active hurricane season in valuing gas higher.
The industry is still well supplied on storage, he noted, so until recent developments actually have a perceptible impact, he sees little to connect them with spot market bullishness.
A Midwest trader, admitting that he really doesn’t trust market forces any more, said he sees the explosions and other factors as mainly an excuse “to get the price [of gas] up there.” The impact is more psychological than physical, he said. However, after some recent mild weather he expects regional price strength to continue as highs currently in the 70s are expected to be reaching the 80s by the weekend.
The National Weather Service (NWS) expects above-normal temperatures (with no below-normal readings) throughout much of the U.S. during the June 14-18 workweek. The only exceptions where NWS predicted normal conditions in Tuesday afternoon’s six- to 10-day forecast were in an area from southeastern California through South Texas and extending northward into southern Wyoming and most of Nebraska, and from the Upper Midwest through most of the Northeast (leaving out the southern sections of Pennsylvania and New Jersey).
Stephen Smith of Stephen Smith Energy Associates projected a storage build of 97 Bcf for the week ending June 4, which he said replaced a previous estimate of 87 Bcf. IAF Advisors analyst Kyle Cooper expected a slightly larger addition of 99 Bcf.
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