Flat to moderately lower pricing dominated the cash market Monday, with larger losses at Midwest/Northeast citygates and some single-digit gains in the Midcontinent, Southwest basins and Southern California border breaking up the overall trend.
Below normal temperatures in much of the U.S. midsection, as predicted by the National Weather Service (NWS) last week, were responsible for some of the softness, but so was the NWS miss on a forecast of above normal temperatures for the Northeast (see Daily GPI, Aug. 18).
A loss of nearly a quarter on the natural gas screen, coupled with large declines across Nymex’s petroleum futures complex, almost assure that all cash prices will be falling Tuesday, a couple of traders said.
Once again predictions of hotter weather in the Northeast have been without basis, said a marketer who noted that only the region’s most southerly cities such as Philadelphia are expected to get above 80 in Tuesday’s daily highs, while the Boston forecast is for a high of 70. Instead of the NWS’s prediction of heat, “it’s very reminiscent of the market for nearly a month now, with not much weather load to be had in the market areas.” Most of the selling interest in futures came after cash trading ended, so it’s pretty much a cinch that cash will continue lower Tuesday, he said. Cash also trended downward in Monday’s session.
All in all, “it’s not hard to get on this bear train at all,” the marketer continued. It looks like a very weak week is shaping up for prices, he said, “but then a lot of people were thinking the same thing about last week, and look what happened.”
“It’s been a weird summer. Actually, we haven’t really had one,” a Midwestern trader said. Noting that 40-degree temperatures at night in her area “are unbelievable,” she exclaimed, “It’s a wonder the crops are growing.” Her company likes “that further downward pressure” on cash prices that the Nymex was applying Monday.
The Midwest market area may remain quite soft, but rising temperatures in the Midcontinent supported small gains on a few pipes. Although area temperatures were limited to the 80s Monday, many will be seeing the low to mid 90s Tuesday, with a high of 71 degrees expected in Oklahoma City.
It’s becoming increasingly obvious that the upcoming bidweek will not only extend the index softness that occurred at most points for August, but the losses also will be bigger. For starters, there’s Monday’s daily screen finish at $5.310, which compares with an August settlement of $6.048. Generally bearish weather outlooks are on tap through the end of the month and beyond. And despite the loss of an estimated 5 Bcf or so recently in the explosion and fire at Duke Energy’s Moss Bluff storage facility (see related update), overall inventories have built up so quickly this summer that traders do not feel the Moss Bluff incident will have significant impact.
In more anecdotal evidence, a Gulf Coast marketer said she hoped to get started on September business Monday “but had no real chance.” She did report that at least “a couple of LDCs are not very excited at all about this bidweek.” They like the fact that swing prices have traded so far below first-of-month indexes this month and “are very comfortable with storage levels,” she said. The marketer’s producer clients, who she said tend to sell mostly at index, already realize that September is “going to be a tough month to move gas in.” For that reason, she expects them to be willing to give sizeable discounts from index and strike bargains on any fixed-price deals.
Kyle Cooper of Citigroup said his final estimation for the next storage report looks for a build between 78 Bcf and 88 Bcf. “An adjustment has been made for the Moss Bluff storage facility and this ‘guess’ obviously reduces our confidence,” he added. “While [his] recent estimates have been exceptionally accurate, a report within our range will keep us satisfied.”
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