Milder than normal weather for early June, futures weakness and continuing concerns about a glut of storage kept cash prices on a downhill run Wednesday. Double-digit declines occurred at all points for the second day in a row.
Chances of a rally in the near term appear to be less than those of an ice cube’s survival on a Houston sidewalk at midday. The July natural gas contract joined Nymex’s petroleum product offerings in tanking Wednesday; significant air conditioning load is likely to remain scarce outside the south central U.S. and interior West for a while longer; and evidence continues to mount that available storage injection capacity is highly likely to be in short supply by this fall.
Cash losses ranged from a little more than a dime to about 45 cents.
Bearish inventory figures from the government Wednesday morning induced steep drops by petroleum-based futures, with crude oil for July delivery diving $1.68 to less than $71/bbl. In turn, the natural gas screen plummeted by 41.1 cents to $5.974 — below the key psychological level of $6.
Tennessee warned customers that, like its affiliated pipeline Southern Natural Gas (see Daily GPI, May 25), it may be required to restrict interruptible storage injections across the system until further notice, including FS-AO, Park and Loan Payback services.
And Columbia Gas posted a notice saying it “would like to express our gratitude to our firm storage service customers for their diligence in managing storage injections to remain within those limitations.” Current injection activity indicated that the firm customers are on target to meet the pipeline’s tariff-mandated June 30 limitation of 60% for storage inventory volumes. Acknowledging “significant challenges still exist for this injection season,” Columbia expressed confidence it will meet all of its tariff obligations on storage. It reminded customers they are not allowed to exceed 85% of their Storage Contract Quantity (SCQ) by Aug. 31. “Meeting this obligation is imperative to maintain control of your SCQ in underground storage reservoirs and in preserving your deliverability rights for the upcoming heating season,” Columbia said.
An unseasonable nor’easter was due to weaken and start drifting out to sea Thursday, but it would leave much of the Northeast near the coast unusually chilly for this time of year. Warmer conditions were forecast for the Midwest, but highs still weren’t expected to exceed the 70s and 80s. The eastern end of the South is starting to get into the 80s again, but will take a while to join the region’s western end in the 90s that usually prevail at this time.
The desert Southwest is seeing its normal visitations to 100-degree-plus highs, and the heat is spreading into the Rockies. Denver is expected to record a high around 90 Thursday. However, the Pacific Northwest is unlikely to exceed the 60s and 70s.
“We’ve all taken a bit of a pounding in prices,” said a Calgary-based producer who said his NOVA Inventory Transfer numbers were down a little more than C20 cents Wednesday. However, he noted, the industry’s overall rapid refill of storage isn’t quite as intense in Alberta, where there is “still quite a bit” of injection space remaining.
The producer reported finding “good value” in moving his supplies to Malin, saying he was able to recover about 50% of firm demand costs Wednesday. Usually the percentage isn’t nearly that high. The Calgary area will be getting cooler in the next few days from forecasts of rain, “which it [Calgary] needs badly,” he said.
A utility buyer in the interior Northeast said temperatures were essentially normal in his area. The nor’easter’s cooling effects were being felt most in coastal areas, he said, but not so much farther inland. System throughput is pretty low currently, he said; “all we’re really doing right now is filling storage.” There is no substantive hot weather on the horizon, with normal to below normal temperatures predicted to last at least another week, the buyer said.
Jim Osten of Global Insight is projecting storage injection reports of 85 Bcf for the week ending June 2 and 95 Bcf for the week ending June 9. Reuters news service said its survey of 19 industry players found a consensus expectation of an 84 Bcf build in Thursday morning’s report; the survey range was 72 Bcf to 105 Bcf.
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