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Prices Dive at All Points Amid Further Mild Temps
The tremendous fundamental weakness of cash prices manifested itself again Friday with large plunges across the board. The previous day’s minuscule rally of 3.6 cents by December futures had no impact whatsoever in averting big losses throughout the physical market as the continuing mildness of mid-November weather and the rapid recovery from this year’s only substantive tropical storm-related disruption of offshore production weighed on traders’ minds.
It was one of the tightest markets in memory, with virtually all locations averaging between $2.20 and about $2.90; only the PG&E citygate in the low $3.20s was outside the overall market. A couple of points (Sumas and Westcoast Station 2) saw dollar-plus drops amid declines ranging from about 65 cents to nearly C$1.10. All geographic regions were pretty close to equal in the overall distribution of softness.
The Energy Information Administration’s report Friday of a 25 Bcf addition to storage during the week ending Nov. 6 was notably above consensus expectations in the upper teens Bcf (the report was issued a day later than usual because of federal observance of the Veterans Day holiday Wednesday). In spite of the apparent bearishness of the build extending a week beyond the traditional end of injection season, Nymex traders managed to eke out a gain of 2.2 cents in prompt-month futures (see related story).
Friday’s widespread softness occurred despite weekend cooling trends in sections of the Midwest, Midcontinent and West. Lows from the upper teens through the 20s were expected in the Rockies and Alberta, but those two sparsely populated areas were about the only ones with severe cold in the forecast.
Meanwhile, the Northeast was due to warm up just a tad during the weekend, while most of the South will stay mild into the upcoming week until a cold front arrives in its western end early in the week.
Thursday’s advent of full service throughout the Rockies Express (REX) system did nothing to cushion the pipeline’s prices. REX quotes in the mid to upper $2.30s into Midwestern and Panhandle Eastern were down nearly a dollar from Thursday.
A utility buyer in the Lower Midwest said his area has been having October-like weather so far in November following a September-like spate of temperatures during October. But autumn conditions were due to reestablish themselves last weekend as conditions got closer to normal after being unusually warm for quite a while, he said. The Saturday forecast called for a low in the mid 30s.
It will be good for business to pick up again for a while, the buyer said, because his utility has had relatively little gas throughput in recent weeks. Chilly temperatures likely will stick around through most of this week, he said.
The buyer noted that with almost all of the market averaging between $2 and $3 Friday, there were hardly any basis spreads to be seen in any direction.
A western trader said a cold front moving into California over the weekend was creating more heating load in the state, which allowed PG&E and SoCalGas to end high-linepack OFOs Saturday (see Transportation Notes). However, that didn’t keep Golden State prices from participating in the same big declines as the rest of the market.
He noted that NOVA Inventory Transfer numbers were “really soft” because of less demand from the Midwest market than previously. And there are still Baja Path constraints in effect on PG&E’s California Gas Transmission system from unplanned maintenance at Kettleman Compressor Station, he said.
For the first time in many weeks the Baker Hughes Rotary Rig Count reflected a decline in the number of rigs actively seeking gas in the U.S. Its gas rig tally fell by six to 728 in the week ending Nov. 13, with two units quitting the search in the Gulf of Mexico and four being deactivated onshore. The latest count is still up 1% from a month ago, Baker Hughes said, but 51% less than the year-earlier level.
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