Prices rose mostly by double-digit amounts Thursday, but traders had trouble identifying what caused the rebound a day after the upward trend earlier in the week had come to a halt. Gains were fairly consistent throughout all regions in ranging from a little less than a dime to about 20 cents.
With high temperatures reaching the 80s in the southern two-thirds of the U.S. and even higher in the desert Southwest, some might have surmised that cooling load is starting to kick in more strongly. But a marketer said storage buying constituted most of Thursday’s business in the intrastate Texas market. The South Texas 2 nuclear unit has reached full power again, he said, and the Comanche Peak 1 nuke is on its way back up, although the ramp-up is proceeding slowly, so gas still is seeing relatively little demand from the state’s power generators. Comanche Peak 1 should be back to 100% by Monday, which is about the same time that Texas will be experiencing bigger power loads along with rising heat, the marketer said.
“I’m getting close to filling my storage account,” he continued. When it gets full he will lose some flexibility on what he can do with his gas, “but I guess I’ll just start selling back out of storage.” Cash prices have traded in a tight range of 2-3 cents at Katy lately, the marketer noted. The Waha-Katy spread had been about 30 cents for a while, which adequately covers the variable costs of cross-state transportation, he said.
The fuel buyer for a Texas electric utility partially confirmed the marketer’s perception of lagging power generation load for gas, saying he was “getting close, but still not buying” any gas yet. His company was “pretty comfortable” on power needs for right now with the South Texas 2 nuke and a coal-fired plant having returned to operation recently. He said it would probably be about mid-May when the weather would be getting hot enough for the utility to re-enter the gas market.
A Northeast utility buyer said he couldn’t really put his finger on anything definite supporting Thursday’s cash price hikes, but was pretty sure that they weren’t based on the previous day’s screen uptick of less than a nickel. It was fairly warm in his city, but temperatures would be cooling off again for the weekend, so any weather fundamentals must have been located elsewhere if they existed at all, he said. The buyer did allow that it “seems like oil must be supporting all energy prices.” He reported that people in Transco’s non-New York City Zone 6 pool were “looking for a lot of gas,” and that Dominion and Tennessee Zone 4 also saw very active trading.
However, a Midcontinent marketer did feel that cash prices Thursday were mostly following the Nymex’s Wednesday performance, modest as it was. “Actually, I think almost everything is revolving around” the phenomenal strength of oil futures currently, he said, although the crude contract for June fell 20 cents to $39.37/bbl Thursday.
The Energy Information Administration satisfied most previous expectations by reporting a 72 Bcf storage injection for the week ending April 30. Prior guesses had centered on the 70-80 Bcf range. Nymex traders treated the report as moderately bearish, sending the screen 9.1 cents lower on the day.
Citing Thursday’s futures weakness, the typical slump in industrial demand over a weekend and general mild to warm weather forecasts, at least one source expects modest softening to return to the market Friday. Cold fronts due in the Northeast and parts of the Midwest aren’t likely to cause significant heating demand, he said.
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