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Price Moves Reverse to Downside at Most Points
The cash market is displaying one of its quirkier characteristics. After rising strongly at all but one point Monday in anticipation of significantly colder temperatures approaching later in the week to much of the nation’s midsection, prices fell at a large majority of locations Tuesday, even as the heating load-boosting conditions began to arrive.
Perhaps they were influenced by the fact that the Midwest, where most of the frigid temperatures are forecast in large urban market areas, will already be returning to more moderate weather by the end of the week.
Most of the market recorded drops ranged from 2-3 cents to the 15-cent area. A few scattered locations were flat to nearly a dime higher.
Line 300 in Tennessee’s Zone 4 continued to get nearer the dollar low it recorded a couple of weeks or so ago with a bottom-end quote of $1.05 Tuesday.
November futures were a mildly bearish factor for cash trading Tuesday following the previous day’s dip of 1.5 cents, but the negative guidance will be considerably greater for Wednesday after the prompt-month contract dropped another 13.5 cents (see related story).
Even as a low-pressure area edged into the east-central Gulf of Mexico, its menace to production grew fainter as chances of tropical cyclone development were downgraded to near-zero and the system remained on track to pass over the Florida keys, the Florida peninsula, southern Georgia and coastal sections of the Carolinas over the next day or so.
One reason for Tuesday’s general softness was the Northeast being forecast to stay merely cool even as near-freezing lows invade sections of the Midwest. The South is feeling distinctly chillier than before with Wednesday lows dipping into the 30s in locations as far south as Jackson, MS, but most of the region will not get below the 40s and 50s. The Rockies and Western Canada constituted the only really cold parts of the West, with cool to mild conditions dominating elsewhere.
Henry Hub traded at about an 8-cent premium to the daily futures settlement of $3.553. The Hub also maintained a basis spread to CIG of about 20 cents.
As Southern began a week of testing Tuesday at its Bear Creek storage field in northwest Louisiana (see Daily GPI, Oct. 18), it reported Monday that as of last Thursday its two storage fields were at 94% of capacity with total inventory of 56.1 Bcf. After lagging for months way behind the refill pace of two years ago, Southern has caught up as its current storage numbers match those recorded on Oct. 15, 2009. It is ahead of last year when total storage was at 54.8 Bcf, or 91% of capacity, on Oct. 14, 2010.
Stephen Smith of Stephen Smith Energy Associates lowered his original estimate of a 117 Bcf storage build for the week ending Oct. 14 to 110 Bcf. IAF Advisors’ Kyle Cooper expects a smaller volume of 106 Bcf. Citi Futures Perspective analyst Tim Evans said he looks for a much larger addition of 131 Bcf, to be followed by diminishing injections of 93 Bcf, 54 Bcf and 15 Bcf for the weeks ending Oct. 21, Oct. 28 and Nov. 4, respectively.
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