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Price Moves Up and Down Nearly Evenly Mixed
The hot weather that had helped sustain moderate price increases during the previous two days was either already fading to some degree or about to do so in key northern market areas Thursday. The result was mixed price movement in trading for Friday flows, with mostly modest gains and losses close to evenly divided.
The fact that declines tended to be larger than the increases tipped the market scales slightly to the softer side. Many points were near flat as gains ran as high as nearly a dime. Losses ranged from 2-3 cents to a little more than a dime.
The Energy Information Administration modestly exceeded consensus expectations centered around 100 Bcf when it reported a 104 Bcf addition to storage for the week ending May 21. However, sources agreed that major strength among Nymex’s petroleum-based offerings, with crude oil rising more than $3/bbl, supported an uptick of 11.5 cents by July gas futures in their prompt-month debut (see related story).
Despite the futures firmness, cash prices are expected to fall in Friday’s trading for the long Memorial Day weekend.
Congested pipeline conditions were easing a bit in the West, as both SoCalGas and PG&E planned to end high-linepack OFOs Friday (see Transportation Notes). Also, El Paso said customer response had been sufficient to lower its linepack to “acceptable levels” in canceling a warning of a potential Strained Operating Condition.
Forecasts of high temperatures close to 90 will keep air conditioners humming in the South and desert Southwest Friday, and the Rockies and Midcontinent can expect warm to hot weather to continue into the weekend. However, a cooling trend will become more pronounced in the Northeast, while several sections of the Midwest are due to see highs dropping into the mid 70s area. Already-established cool conditions will persist in the West Coast states and Western Canada.
A Gulf Coast producer said he could see nothing other than the oil price jump that boosted gas futures in spite of the slight bearishness of the storage report.
He said his company had already finished virtually all June business Wednesday, and he could detect little bidweek activity Thursday among other trading operations. Dominion prices seemed unusually strong for June to the producer, but most other locations were seeing normal pricing, he said.
Although area temperatures were reaching the mid 80s recently and expected to remain like that through the weekend, a Midwest utility buyers said he had not seen a corresponding big increase in power generation. To him, that indicated little if any maintenance downtime currently for nuclear or coal-fired plants in the region.
The buyer said bidweek was largely a repeat of May’s in that his company had similar loads in each case, but June prices were lower. However, the screen increase caused June numbers to go up nearly a dime Wednesday, he said.
It had been warm earlier this week, but Thursday was the first “really hot day” in the Rockies, said a regional producer. He expressed surprise at gas futures being so strong despite the storage reported and a three-day weekend looming.
The producer said end-users can’t be unaware of active hurricane forecasts for this year, so he thought many of them are locking up future supply already. “Why run the risk?” he asked rhetorically of the potential for major hurricane disruptions of offshore production. The end-users “realize that it hasn’t been that long since gas was north of $10,” he added. In addition, he anticipates falling U.S. LNG imports because prices are so much higher in other parts of the world.
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