Beset by negative influences from several directions, prices plummeted across the board Friday with drops approaching or exceeding a dollar in many instances. But hold the phone on those predictions earlier this week that there was almost no chance of a cash market rally between now and the end of the month. One appeared to be shaping up for Monday’s trading.
Virtually all points fell from around 55 cents to nearly a dollar, and a solid majority saw declines of 75 cents or more. There was little geographic disparity in the degrees of softening.
The usual suspects played their part in Friday’s price rout: a continuation of generally moderate weather into the weekend; a bearish storage report the day before, and the accompanying screen dive of more than 40 cents; and the reduction of industrial load that occurs over a weekend.
Further evidence of how weak the market had gotten came from cautionary postings by several pipelines about how receipts were rapidly outpacing deliveries. With almost no space left to accommodate further storage injections, the pipes were worried about excessive linepack levels. The basic message: current demand is too low to soak up all new production, so many shippers are trying to leave their gas that can’t find a home on the pipelines without paying for “parking” service.
Weather was not supporting the weekend cash market at all. said a producer who trades the Northeast. However, he expects fairly sizeable price increases Monday even though little improvement in fundamental support is likely. “It [cash rebound] didn’t look like it early this morning” when December futures were in the red, he said, but then the contract rallied, basically following oil futures higher again. The Northeast should be getting closer to seasonable weather next week instead of the recent mild conditions it’s been seeing, he added. Highs in the low 50s and lows in the low 40s are predicted in the New York City metropolitan area early in the week.
A return to higher prices is coming much sooner than several sources had expected. Henry Hub was being bid Friday afternoon in the mid $5.20s for Tuesday flows, the producer said, which would be up a little more than 40 cents from Friday’s average. On another subject, he commented, “You’d think there has to be some cash-screen convergence” before December futures go off the board Wednesday, but it probably won’t make it all the way after the spread between the screen and Henry Hub widened hugely to more than $2 Friday.
Later a Houston-based marketer indicated that Monday’s gains might get even bigger. Henry Hub last traded at $5.25 for Tuesday flow, he said, but then was being bid at $5.30 and offered at 5.60, which he conceded was a wide buy-sell gap to close. The marketer agreed with the producer on convergence, saying it may be hard to believe, “but I don’t think we’re going to see much” of it. A $2-plus gap between the Hub and the screen is a lot of price ground to make up in the last three trading days of the December contract, he said.
The West was due to have the greatest amount of weather-related load over the weekend, with cold and snowy conditions predicted from the Four Corners area through the Rockies into the Pacific Northwest, according to The Weather Channel. But that did little to stem regional price drops of 80 cents or more since the cold area is relatively sparsely populated in most sections. Also, Southern California Gas made it six days in a row by extending a high-linepack OFO through at least Saturday.
One source reported hearing these early December basis numbers (all plus in cents): low to mid 80s for Transco Zone 6 non-NYC, mid 90s for Texas Eastern M-3 and 105-110 for Transco Zone 6 NYC.
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