NGI Archives | NGI All News Access
Rally Continues at Slower Pace; Rockies See Spikes
The cash market advanced again at nearly all points Thursday as it continued to ride the coattails of prior-day futures strength and got an extra boost from forecasts of rising temperatures in the Northeast. However, except for spikes in the Rockies, Thursday’s gains were considerably smaller than those of Wednesday, signaling that this week’s rally may be starting to run out of steam.
Only small losses of about a dime and a nickel at Florida Gas Zone 3 and the Florida citygate, respectively (after Florida Gas Transmission had ended an Overage Alert Day) averted an across the board run of firmness. Gains ranged from 2-3 cents to a little more than $1.25, but outside the Rockies increases were capped at nearly 30 cents.
Rockies spikes from about 90 cents at Questar to just over $1.25 at Northwest-South of Green River represented an acceleration of the regional market’s recovery from the Tuesday debacle that had taken quotes as low as 15 cents for the second time this year. But even Thursday’s big gains still left most Rockies points averaging on either side of $2, for a basis spread of about $4 behind Henry Hub.
The persistence of basis blowouts this year has some Rockies producers shutting in production temporarily to await the arrival of extra takeaway capacity on Rockies Express Pipeline (REX) early next year (see related story).
Cooling load was rising in the Northeast with temperatures expected to rise nearly 10 degrees Friday. The New York City forecast called for Thursday’s high around 80 degrees to be replaced by an 89 peak Friday. However, mercury levels will be essentially static in the South and falling slightly in the West and Midwest.
The Energy Information Administration fell short of consensus expectations in the low to mid 40s Bcf when it reported a storage addition of 36 Bcf for the week ending Aug. 31. But although October futures had been in positive territory preceding the report and for a while afterward, Nymex traders apparently attached more importance to generally bearish weather fundamentals in sending the contract to a 15.5-cent loss on the day.
That makes a cash retreat likely Friday, since much of the midweek rally had been predicated on futures strength. The Friday market also will be influenced by the weekend drop of industrial load.
Friday softness would not surprise a Midwest utility buyer at all, since he reported mild highs in the upper 70s in his area. Something that is helping to make up for the shoulder-month drop in weather-based demand is the onset of agricultural harvesting and processing load, he said. His company is already seeing some pickup in that area, and the big months of September and October are still ahead, he added.
The buyer said he has been working on October baseload and November-March winter term deals this week, but hasn’t had much luck. It seems suppliers are very reluctant to sell under term deals at less than index plus a penny, he reported. “You’d think they might bend” to accept index plus a quarter-cent or half-cent, he said, but it isn’t working out that way.
The buyer figured he might have better luck if the utility had access to Rockies production, but he said it takes three different pipeline connections to get gas from there to his citygate, which makes it unfeasible to take advantage of currently distressed Rockies prices. He looks forward to Phase II of REX coming on-line, which should allow the utility to economically transport gas from the Rockies.
©Copyright 2007Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2024 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |