Cash prices finally faced up to the reality of weak fundamentals Friday with across the board plunges. Many points fell more than a dollar as moderate weather, brimming storage coffers, pipeline OFOs, prior-day screen softness and the usual weekend drop in industrial load ganged up on a market that had been mostly rising in the previous three days with little visible means of support.
Overall losses ranged from 40 cents to a little more than $3 in one case. The Northeast and West tended to see most of the dollar-plus declines.
Some points were recording their lowest quotes in more than two years. CenterPoint-West led the steep downhill tumble with a single deal at $3.75, while Opal and the Southern California border had bottom-end prices of $3.95 and $4.00 respectively. The last time the three had been cheaper than that was in Oct. 31, 2003 trading for Nov. 1-3 weekend flows, when they averaged $3.61, $3.80 and $3.79 respectively. A high-linepack OFO by SoCalGas, the nation’s largest LDC, obviously had a lot to do with the border’s major weakness.
CIG also added a high-linepack OFO Friday to the plethora of OFOs and similar pipeline constraints that have been accumulating this week. Most of the constraints have been related to having no space left in storage facilities, depriving a substantial amount of gas of a potential home in a low-demand period.
“There’s not a lot of demand and the pipes are chock full,” said a producer who trades the Northeast. “Until we get some gas off the pipes, this market’s going to be ugly.” There’s no more room left in storage,” and a lot of people have shorted the market, he added. Friday was a beautiful fall day almost everywhere, the producer said, but it can only stay warm for so long.
“Nobody has a real good idea about where demand will be when we get a good cold snap” because of the issues of storage and shut-ins, he continued. It seems to be a world away when prices were this low in the past, he said.
The weekend load slump was accentuated by Friday being the Veterans Day holiday in the U.S. and the Remembrance Day holiday in Canada, although not everyone gets the day off from work on those occasions, one source noted. He saw a chance of a moderate rally Monday based on the screen’s 33.2-cent gain Friday and the fact that colder temperatures will start developing in the East over the weekend and early next week.
The source found it a bit curious that the market was able to rise earlier in the week when weather-related loads were lighter and then took a dive as more supportive temperatures were in the offing, but he reasoned that prices were consolidating their previous gains Friday and had factored in Thursday’s screen drop of nearly 30 cents.
Stormy cold fronts were predicted to be moving through the Northeast and Pacific Northwest by Sunday, while the South and Midwest were due for rather mild weekends. But the latter two regions will be joining the Northeast and Midwest in experiencing much colder conditions as the middle of this week approaches.
The Weather 2000 consulting firm certainly supports a rather bullish forecast for the next couple of days. “This cold air mass sweeping across the Northeast is yet another preview of the more frequent and more intense cold waves that are set to chip away at [the] current warm and benign Indian Summer pattern,” it said in a Thursday advisory. “The next wave, arriving [in] the middle of [this] week, is a comparative doozy, and is setting up to deliver some of that cold Alaskan air we’ve been talking about recently over a much wider area of the U.S. High temperatures across North-Central states, the Great Lakes and eastward are set to tumble from 50s, 60s and 70s down into the 30s, 40s and 50s, while overnight lows will crash from balmy 40s and 50s well into the teens, 20s and 30s. Not to be outdone by the cold air, ample lake effect and lighter wrap-around snows will accompany the winter clash over the Great Lakes and northern Northeast states.
“Behind this cold snap, a swing back to warmth is expected, but we believe it will not be as warm, and certainly not as long-lasting as this recent Indian Summer episode. There is plenty more cold air building over Alaska and Western Canada, ready to be tapped by vigorous and growing Polar and Hudson Bay Vortices. The North Atlantic Ridge also looks to be solid, and will only help to recharge these vortices and really set winter in motion.”
Minerals Management Service did not update its reports on Gulf of Mexico shut-ins due to observance of Veterans Day.
Citigroup analyst Kyle Cooper expects yet another net injection in the storage report for the week ending Nov. 11. His initial estimation calls for a build in the mid to upper 50s Bcf.
©Copyright 2005Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |