As expected, the post-holiday rally in cash prices was unable to sustain itself any longer in the face of receding weather-based demand and weakening futures support. Quotes fell at a large majority of points Thursday, although generally by small amounts. A few flat to a little less than a nickel higher locations resulted in mixed price movement overall.
Almost all of the declines ranging from 2-3 cents to about 15 cents were in single digits.
Although it will be a weekend market Friday, cash quotes will have substantial screen support. The Energy Information Administration’s (EIA) report of a 69 Bcf addition to storage during the week ending Sept. 4 was a bit less than consensus expectations in the low 70s Bcf. It perplexed some cash traders, but October futures nevertheless spiked 42.7 cents on what was largely attributed to short-covering (see related story).
Citi Futures Perspective analyst Tim Evans, acknowledging that the build was slightly below expectations “and mildly supportive in that sense,” noted that it was still marginally above the 67 Bcf five-year average “and may not require big revisions to our forward outlook.”
Weather fundamentals remained mostly bearish for the gas market, with a recent warming trend in the Rockies due to retreat quite a bit Friday. Significant temperature declines in the Northeast and static readings in the Midwest were insignificant for weather-based demand, while the South continues to record slightly subpar highs in the mid to high 80s for late summer.
Temperatures will get up to the upper 80s in parts of the Pacific Northwest Friday, but Western Canada will remain cool in the low 70s or less. The desert Southwest and inland California are providing a great deal of the nation’s current cooling load with highs around 100 or more forecast for Friday.
Hurricane Fred? A little weaker and still a total nonevent, although it was expected to begin tracking more to the northwest by early next week, according to the National Hurricane Center.
The National Weather Service (NWS) drastically revised its six- to 10-day forecast from the one it posted Tuesday afternoon for the Sept. 14-18 workweek (see Daily GPI, Sept. 9). It now calls for below-normal temperatures in the Sept. 15-19 period south of a line running westward from northern Virginia through southeastern Colorado before curving to the south through central New Mexico. NWS also predicted above-normal readings west and north of a line running northeastward from central Arizona through northwestern South Dakota, then extending through the Upper Plains and Upper Midwest into most of the Northeast.
“What are they seeing?” a flummoxed Midwestern utility buyer asked about the Nymex traders’ highly bullish activity. He also thought the recent cash price strength was not justified, but said Thursday’s minor softness was a sign that “things are getting back to normal. He characterized Hurricane Fred as “a fish storm” and nothing more.
The buyer said he would expect even softer numbers to continue Friday despite the futures spike. Noting that fall officially begins Sept. 22, he said there are no hot spells in the 10-day forecast for the Midwest, and he suspects that the region may not get significantly hot again this year.
An Upper Midwest marketer said her company also was puzzled about the screen spike. It didn’t see anything other than daytime 70s and occasionally upper 40s at night by mid-September, she said, “and that’s not a big deal when you’ve got dry air.”
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