Tropical storms may have been the big news of the day, but large rebounds in the cash market Tuesday weren’t exactly small potatoes. Storm-related shut-ins (see related story) combined with high heat levels in a few areas and a stronger Friday screen to generate price increases that were as small as a little less than a quarter, but mostly were substantially larger.
Western points led the overall advance with gains just shy of a dollar on Questar and around 90 cents in San Juan Basin and at the Southern California border. Besides searing heat continuing to propel power generation load in the desert Southwest, markets in the West were freed of the depressing effects of weekend OFOs by the giant California utilities (see Transportation Notes).
With Tropical Storm (TS) Cindy already causing offshore shut-ins and TS Dennis moving rapidly from the southeastern Caribbean toward the Gulf of Mexico (GOM) poised to become the 2005 Atlantic season’s first hurricane and possibly provide backup disruption of offshore production around the weekend, Nymex traders sent the August contract 30.4 cents higher Tuesday. Oil-based futures contracts also soared based on the storm fears about supplies.
That should provide enough momentum to keep cash numbers climbing Wednesday, one source said. However, he noted that Cindy’s heavy rains are due to suppress temperatures and related power generation loads over the next couple of days or more in the Southeast, which has been the source of much of the nation’s cooling load recently.
Minerals Management Service said a total of 352.76 MMcf/d in Cindy-related shut-ins had been reported to it by 12 companies by 11:30 a.m. CDT. NGI‘s spot check of pipelines and producers found that many anticipated little effect from shut-ins, and that any effect would be fading rapidly Wednesday. However, both the MMS tally and NGI’s poll were taken before Cindy’s maximum sustained winds jumped to 70 mph, just short of hurricane status (74 mph), late Tuesday. The storm was expected to make landfall by late Tuesday or early Wednesday in the New Orleans area without becoming any worse, according to the National Hurricane Center.
Forecasts of daily highs exceeding 100 degrees from central Texas through the eastern part of Southern California provided a lot of the rationale for the major cash gains in the West.
Far removed from the tropical storm fuss, a Lower Midwest utility buyer said things were “pretty calm” in her area. With highs only reaching the mid 80s and the resultant low load factor, the utility didn’t need to buy any new gas Tuesday, she said, which was fortunate considering how high prices jumped. Things should be getting warmer toward the end of the week, so the buyer expected to be making daily purchases again then.
Analyst Kyle Cooper of Citigroup made a final estimation of a 60-70 Bcf storage injection to be reported for the week ending July 1. That could be considered bullish because of falling substantially short of comparable builds in the past. Stephen Smith of Stephen Smith Associates was calling it at 67 Bcf (see separate story) and Thomas Driscoll of Lehman Brothers said he expects a moderately larger injection of 75 Bcf “based on recent and historical trends adjusted for weather.”
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