The number of double-digit gains increased Tuesday as a price advance across the board occurred for the second day in a row. Although weather conditions remain generally bearish for gas prices, especially with the Northeast growing even cooler, and tropical storm menaces to offshore production virtually ruled out for the rest of the season, at least the cash market could point to Monday’s 8.1-cent increase by October futures as impetus for maintaining its firming trend.
The Northeast repeated as the market area with most of the biggest upticks amid overall gains ranging from a couple of pennies to about 20 cents. The Florida citygate led the advance as Sunshine State temperatures continued to peak in the low 90s.
After sinking as low as a dollar late last week, quotes for Line 300 in Tennessee’s Zone 4 are gradually firming slightly with a bottom-end quote of $1.50 Tuesday. Some takeaway capacity relief for Marcellus Shale production is on the horizon after the Federal Energy Regulatory Commission approved a Tennessee request to begin operations on part of its Line 300 expansion project.
Although not as strong as on Monday, October futures — which will expire Wednesday — again had a bit of support for next-day cash prices as they rose 4.5 cents (see related story).
Like a phoenix rising from the ashes, former Tropical Storm Ophelia showed it wasn’t down for the count after all by restrengthening into a tropical depression. Despite its survivor’s instincts, the system’s projected tracking northward toward Bermuda would keep it well away from the East Coast. And Tropical Storm Phillippe was still closer to West Africa Tuesday than to the Caribbean Sea and appeared destined to advance no farther westward than the central Atlantic at most.
Besides Florida, temperatures continue to be highest across the southwestern U.S. into interior California. Though most of the Midwest is staying cool, warming trends are under way in a few portions of the region, but not raising any chances of heating load with highs limited to the 70s. The Rockies are also warming slightly, while mild conditions still dominate the rest of the weather outlook.
Southern is approaching a full-storage situation, reporting that as of Sept. 22 inventories at its two fields stood at 52.6 Bcf, or 88% of total capacity of 60.0 Bcf. That’s running ahead of last year’s refill pace, when the volume was 51.4 Bcf (86%) on Sept. 23, 2010; but it’s actually way behind two years ago, when storage levels on Sept. 24, 2009 stood at 58.1 Bcf (97%).
With area highs not getting above the low 80s, a utility in the South is experiencing low load requirements, its fuel buyer said. There’s no heating demand yet, he added, “but we know it’s coming.” In fact, after shunning the monthly baseload market for several months due to summer term contracts, he was making bidweek deals again because of expecting some colder weather in October. The utility is topping off storage late this month, he said, but is leaving a little space available in case it can take advantage of any big price drops.
The buyer reported physical basis purchases for October in TGT Zone 1 at minus 8.6 cents and in Trunkline Zone 1A at minus 7.6 cents.
A Midcontinent producer said he was not sure why cash prices have been so strong early this week in the face of nominally bearish influences, but he suspected that the relatively low numbers seen in the market in recent weeks may have stimulated buying. Physical basis for October baseload in the Midcontinent is pretty tight, he said, prompting him to to anticipate first-of-month indexes in the upper $3.60s and low $3.70s. However, CenterPoint East is an exception in trading lower than neighboring pipes, he said.
There’s “just too much associated gas [being produced in oily shale plays] hitting the market and not enough demand to offset,” the producer added in assessing the overall weak overtones of the gas market. He had no idea when this might change but said, “Maybe if oil drops below $50?”
Despite rising futures so far this week, bidweek quotes were mostly flat to slightly lower from Monday, according to IntercontinentalExchange (ICE). Southern California border and SoCal citygate numbers were flat to down a penny or so Tuesday in ICE platform trading. NGPL-Midcontinent was among the rare exceptions in seeing an increase of about 2 cents, ICE said.
Here is a sampling of analysts’ projections of storage additions during the week ending Sept. 23: 103 Bcf, Kyle Cooper of IAF Advisors; 104 Bcf by both Stephen Smith of Stephen Smith Energy Associates and Stefan Revielle of Credit Suisse; and a significantly lower volume of 93 Bcf, Tim Evans of Citi Futures Perspective. Evans goes on to estimate builds of 91 Bcf, 95 Bcf and 91 Bcf for the weeks ending Sept. 30, Oct. 7 and Oct. 14.
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