Getting a fresh burst of “energy” from the previous day’s 44-cent futures spike, cash prices rose across the board Thursday. In most cases the gains were larger than on Wednesday, despite weather load remaining light for the most part outside some 100-degree forecasts in the desert Southwest.
Upticks ranged from a little less than a nickel to around 30 cents. Even with area peak temperatures in the upper 80s expected to stay a little below seasonal norms through Friday, the Houston Ship Channel recorded Thursday’s biggest gain.
There was some speculation that drops in drilling activity and production curtailments may have been behind the Energy Information Administration’s report of a less-than-anticipated 66 Bcf addition to storage during the week ending Sept. 11. The range of prior expectations was unusually wide this time, with some flow models calling for the upper 60s Bcf while a few analysts estimated as much as the low to mid 80s Bcf.
But despite the seeming bullishness of the storage report, Nymex traders obviously thought otherwise. They apparently put more stock in overall fundamentals still being quite weak than the results of one subpar storage build in sending October futures 30.2 cents lower (see related story).
Florida citygate prices were up less than 20 cents even as Florida Gas Transmission (FGT) reinstated an Overage Alert Day with a relatively stringent (well, at least for FGT) imbalance tolerance of 15%.
But Tennessee sounded a bearish alert in announcing that a systemwide OFO Action Alert against positive imbalances will be implemented Sunday (see Transportation Notes).
What’s new in the weather outlook? Almost nothing. Other than some locations in Florida and the desert Southwest due to reach the 90-100 area Friday, there’s not much cooling load anywhere else, and the cool regions aren’t cold enough for any significant heating demand yet. Heavy rainfall is keeping most of the South limited to the mid 80s or less.
With a low-pressure area in the eastern Atlantic and the remnants of Hurricane Fred having dissipated, the National Hurricane Center said it had no new Atlantic tropical activity to report Thursday.
A Texas-based marketer said he was “not really surprised” by recent price strength despite concerns about a storage surplus that have been going on since mid-summer or so. However, he said the cash market is pretty much depending on futures support for its recent gains because weather and tropical storm activity certainly aren’t much of a factor.
“I’m shocked at this gas rally,” said a Rockies producer, who couldn’t see any other reason than short-covering for the screen strength until Thursday. Unlike some others, he doesn’t see much power generation switching back to coal yet. But he did report seeing that East Coast power prices have jumped recently, which may have lent some support to gas prices.
The producer said he had seen forecasts of high heat levels in Southern California starting this weekend, “and they’re second only to Texas for gas-fired generation.” He thought Rockies Express shipments of Rockies gas eastward have been denying California its usual amount of supplies, so that’s why such locations as the PG&E citygate have been leading market prices recently. Also, more Western Canada gas is going to the Midwest instead of California because the Midwest is one of the few areas with a substantial amount of storage space left.
A Florida utility buyer thought FGT’s tighter-than-usual Overage Alert Day tolerance likely was because “the state hasn’t been getting the rains it expected,” so some people “overburned” (used more gas than nominated) Wednesday. He also said he was not really surprised about prices staying mostly firm lately even with little weather demand because by now it’s “old news” that there is a lot of gas in storage, and the market looking more forward to the winter months.
“Obviously there’s buyers out there,” the buyer said, or otherwise prices wouldn’t keep going up. And despite the Rockies producer’s perception, he said he had seen some recent switching back to coal-fired power generation from gas use in Florida.
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