Gradually strengthening hot weather fundamentals solidified the post-weekend price rally Tuesday, putting all points into the rising column and creating larger gains than the day before in the Gulf Coast, California and Rockies. Upticks ranged from about a nickel to 20 cents.
For a change Monday’s screen decline of 6.9 cents had no impact on next-day cash, and futures traders had precious little new guidance to offer Tuesday with a gain that fell barely shy of 2 cents. However, major losses throughout Nymex’s petroleum product offerings may come into play in Wednesday’s market, one source said.
Buzz over stirring activity on the tropical Atlantic front may have lent some support to cash numbers. A “strong” tropical wave, as The Weather Channel (TWC) described it, proceeded westward through the eastern Caribbean Sea Tuesday afternoon. TWC continued to maintain that climatic factors did not favor additional development, but because convection around the wave had maintained itself and wind shear over the system was expected to decrease, “some further development is not out of the question over the next 24 hours.”
Back on land, temperatures were inching higher in several areas. A small decline in mercury levels in the South to begin the week was already in retreat, with the region expected to experience highs in the 90s and humidity typical of mid-summer Wednesday. The Midcontinent showed no signs of a break in the scorching conditions it has endured in recent days, and Lower Plains predictions included heat advisories for the St. Louis and Kansas City areas.
It was also pretty warm Tuesday in the Lower Midwest, a utility buyer in the region said, but the forecast called for turning cool and rainy around Thursday through early next week. That cast doubt on whether the current price rally could last much longer, he said.
A marketer said air conditioning load was increasing in the Upper Midwest, with Michigan seeing highs in the mid 80s Tuesday. But echoing the utility buyer, the heat will be short-lived, with highs around 70 degrees due Friday, he said. The marketer noted that the “fear premium” is still active in energy markets and that it was taxing end-users’ bottom lines greatly. “You’d think there would be more downward pressure on prices” with bearish influences such as high storage inventories and a relatively mild summer so far, he said.
Although above normal temperatures are expected in the Northeast, the National Weather Service has a somewhat bearish outlook for gas prices in its forecast for the July 26-30 workweek. NWS also predicts above normal readings west of a line running due north from central Arizona and then curving northeastward after it gets into southwestern Montana. But the agency looks for below normal temperatures south and east of a line running generally westward from the coastal border of Virginia and North Carolina and then turning south in western Wyoming (the southern tip of Florida will be a “normal” exception in this region).
Lehman Brothers analyst Thomas Driscoll said he expects a storage injection of 95 Bcf to be reported for the week ended July 16, further increasing the 2004 surplus to both the year-ago and five-year average levels.
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