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Screen, Southern Cooling Push Most Points Lower
Pressured by the previous day’s 19.2-cent drop by July futures and with modest cooling load growth in parts of the Midwest and Northeast being offset to some degree by falling high temperatures in much of the South, cash prices softened at most locations Wednesday. More moderate weather forecasts for the end of June and early July also contributed to the overall bearishness in the physical market.
Most points were flat to nearly 40 cents lower, with the losses spread fairly consistently throughout the various geographic market areas. Intrastate OGT saw the biggest decline despite temperatures in Oklahoma City expected to nearly reach 100 degrees Thursday.
Due to strong air conditioning demand within the region and to the south in the desert Southwest, Rockies gains from about a dime to 40 cents constituted most of the exceptions to overall price drops. Other upticks were at Florida Gas Zone 3 and the Florida citygate (about a dime and a quarter, respectively). Florida Gas Transmission warned of a potential Overage Alert Day for the second straight day Wednesday. Florida Gas Zone 3 recorded the Gulf Coast’s sole increase.
A few Northeast citygates, along with Transco Zone 5 in the Mid-Atlantic, also ran against the grain of generally lower prices. New York City is forecast to approach 90 degrees Thursday.
It’s unlikely that the cash market will see an overall rally Thursday after July natural gas futures dropped another 25.8 cents in their penultimate day of trading. That makes a total drop of about 45 cents over two days in the natural gas contract (see related story).
Although high temperatures are due to remain in the mid 90s Wednesday in its inland Northern California service area, PG&E issued a high-inventory OFO for Thursday (see Transportation Notes). Malin and the PG&E citygate dropped nearly a quarter each. Although SoCalGas did not issue an OFO, the Southern California border saw an even bigger decline of about 35 cents.
Cooling load is still fairly robust but declining in the South. Most of the region’s cities were seeing highs in the low to mid 90s through Wednesday, but will drop into the upper 80s Thursday.
Heat levels will inch up a bit more Thursday in much of the Midwest, with Chicago’s peak around 84 degrees Wednesday expected to be succeeded by a high of 87. However, some of the region will be cooling off. The Minneapolis-St. Paul area, which constitutes a major load center for Northern Natural Gas, approached 90 degrees Wednesday but will see a high in the low 80s Thursday, according to Madison, WI-based Weather Central.
A Texas-based marketer said the only significant transportation issue for his company was a pigging operation due to start Thursday on Dominion. It will cut all nominations up to Primary Firm service, he said, and he was having to shuffle gas volumes Wednesday as a result. The marketer said he didn’t recall ever encountering such summer restrictions on Dominion in previous years.
He said his company was “almost done” with July business Wednesday afternoon. “People are kind of scared” about what July futures might do on expiration day Thursday, so they speeded up the pace of bidweek trading, he said. A lot of physical July baseload has already been traded, as a fair number of traders prepare for taking the entire Fourth of July week off for vacation, he said.
Chicago basis traded Tuesday and Wednesday in the range of plus 2-7 cents, with most deals around plus 6 cents, the marketer continued. Basis in general was getting stronger due to Tuesday’s and Wednesday’s screen declines, he added. He said he estimates that NGI‘s Chicago index for July will be around $12.87.
The National Weather Service (NWS) forecast for the June 30-July 4 workweek calls for above-normal temperatures almost everywhere west of a line running from northwest Wisconsin through central Texas. The exception of normal conditions in that region is in the southern two-thirds of California along with the southern edge of Nevada and a strip along the western border of Arizona. NWS also expects above-normal temperatures in Delaware and Maryland along with the eastern halves of Virginia, North Carolina and South Carolina. The only area where below-normal readings are predicted is in the eastern half of the Midwest, western New York and the northwest corner of Pennsylvania.
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