The market was hit with hefty losses across the board Friday, coming under pressure from relatively light cooling load outside the southern half of the U.S., a 14.9-cent screen drop on Thursday and increasing concerns about a potential future price crash when most available storage injection space gets eliminated. Of course, the decline of industrial load that is typical of a weekend also played a role.

Double-digit declines reigned at all points, with quotes falling from about a quarter to nearly 80 cents. Only one point (Transco Zone 5) softened by less than nearly 40 cents. The Northeast, where weekend high temperatures were not expected to exceed the 70s, tended to see the biggest losses.

Prospects for a rally this week look dim. July futures fell another 21.3 cents Friday, and most of the East is due to experience below-normal temperatures. Most of the heat will be concentrated in the interior West, with its relatively sparse population.

The Michigan market may provide the first serious test of the presumption that prices will drop big-time when storage injection capacity starts running out. Bentek Energy’s analysis of flows at 14 natural gas hubs (https://intelligencepress.com/features/bentek/) shows that Michigan Consolidated Gas citygate volumes continue to shrink drastically. Nominations for Friday’s gas day dropped another 80,000 MMBtu/d from Thursday to 224,000 MMBtu/d. That’s well under a third of the month-to-date average of 738,000 MMBtu/d that MichCon was running in June of last year. Milder weather in the current month was one factor, but a marketer recently told NGI that MichCon had informed customers about its storage facilities getting close to full (see Daily GPI, June 14).

A MichCon spokesman said Friday he was unable to ascertain specific figures, but it was safe to say that “we’re pretty near peak storage.” He agreed that both the milder weather this year and a relative lack of injection capacity have been factors in the company’s greatly reduced throughput.

Michigan has the most storage capacity in the nation with nearly 600 Bcf of working gas capacity, according to NGI‘s storage map and statistics. MichCon holds about one-third of the total with 177 Bcf. Consumers Energy and ANR Pipeline are two other big storage operators in the state. Currently ANR is not allowing any interruptible injections (see Daily GPI, June 20).

In its “Operationally Available Capacity” posting for Friday, ANR Storage Co. said it had only 7,152,451 dekatherms of space remaining at three facilities. Total operating capacity was 57,138,640 dekatherms, the company said.

SoCalGas indicated that its storage is also constrained by issuing a high-linepack OFO (see Transportation Notes). “When injection capacity falls below 850 MMcf/d, confirmations of firm storage injection nominations will be reduced as outlined” in a July 1, 2005 posting on its Envoy bulletin board, the giant LDC said in its OFO notice.

SunTrust Robinson Humphrey/the Gerdes group’s John Gerdes said the market “expressed disappointment at the lack of a surprise” in the 79 Bcf storage injection reported for the previous week. “The 79 Bcf injection indicates to us that industrial demand has still not experienced any meaningful y/y [year on year] growth and likely is flat y/y. In the upcoming week, cooling demand is forecast to exceed the norm by 7%. However, the important South Central region where much of the gas-fired power generation is located is actually forecast to be 6% below average cooling demand. With moderate weather conditions and the prevailing fundamentals, [this] week may be a bearish one for natural gas.”

Pacific Gas & Electric obviously is relying considerably more on Canadian supplies now than it was a year ago. Bentek’s data showed that while month-to-date citygate volumes averaging 2,181,000 MMBtu/d are running only 57,000 MMBtu/d, or 3%, above comparable flows for June 2005, Malin nominations of 1,655,000 MMBtu/d are a whopping 330,000 MMBtu/d higher than year-ago figures.

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