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Softness Continues at Most Points, But Screen Gain May Rally Cash
Most of the cash market dropped again Thursday, pressured lower by Wednesday’s third straight day of futures weakness and unable to rebound despite increases of cooling load in some areas.
Exceptions to the overall softness were flat to about 15 cents higher numbers at a few Rockies points, San Juan-Bondad and Westcoast Station 2. Otherwise, losses ranged from a couple of pennies to a little more than half a dollar. There was a little hint of relative strength in the fact that Thursday’s declines were less than Wednesday’s in most cases.
Much like the previous week, the Energy Information Administration report of a 90 Bcf storage injection for the week ending July 4 fell slightly short of consensus expectations in the low to mid 90s Bcf. The initial Nymex traders reaction was essentially neutral, but later the August natural gas contract followed the lead of a $5.60 spike by August crude oil in finishing the day 29.4 cents higher (see related story).
The Rockies have tended to be stronger than the general market in the last couple of days because of fairly strong local cooling demand. Denver’s Thursday high in the mid 90s is expected to be repeated Friday. But although highs around 100 or greater will continue in inland California, all California points fell by about a quarter or more. PG&E issued a high-inventory OFO (see Transportation Notes) and the citygate was down about 30 cents. SoCalGas did not issue an OFO, but the Southern California border saw an even bigger drop of nearly half a dollar.
Peak temperatures will be rising by five degrees or so Friday in much of the Midwest and Midcontinent, and the South will be warming slightly. But the rises in cooling load were unable to overcome the screen’s negative guidance for Thursday’s cash numbers.
Highs will remain in the vicinity of 90 degrees in the lower Northeast, but New England will be cooling to around 80.
The price-boosting effect at Sumas and Westcoast from Northwest ending two constraints Wednesday didn’t last long. The two points, which had jumped Wednesday by $1.01 and C89 cents, respectively, fell about a dime (Sumas) or was flat (Station 2) Thursday after the pipeline announced a new Declared Deficiency Period (see Transportation Notes).
NOVA Inventory Transfer had commanded a premium of about $1.60 over Westcoast Station 2 as recently as Tuesday (see Daily GPI, July 9). On Thursday the spread had shrunk to a little more than 20 cents.
There was little news on the Hurricane Bertha front other than that it regained Category Two status for a while Thursday before weakening to a Category One storm for the second time. Bertha is still expected to pass to the east of Bermuda on its way into North Atlantic waters.
The Northern Natural Gas bulletin board indicated the extent of a weekend cooldown in much of the Upper Midwest. The pipeline’s normal system-weighted temperature at this time of year is 72, Thursday’s posting said, but projected averages were 77 Thursday and 78 Friday before falling to 69 Saturday and 68 Sunday.
A Houston-based marketer expects the cash market to be “up a little” Friday based on the screen run-up Thursday, but said increases will be limited because of the weekend decline of industrial load. Prices mostly stayed flat or moved a bit lower, depending on the region, as cash trading proceeded Thursday morning, he said. The below-expectations storage report had little to do with the eventual spike by August futures, he added; instead the natural gas contract was “following the oil.”
Although Florida Gas Transmission extended an Overage Alert Day (OAD) into its third day Thursday, a Florida utility buyer said there doesn’t seem to be that much gas load in the Sunshine State. Just about all of Florida’s coal and nuclear generation plants are in full operation, leaving most of the gas-fired peaking units idle, he said. However, “I got three calls” for intraday supply Thursday afternoon, he added, so gas demand may have been ramping up.
High prices and a recession-like economy seem to have cut into overall energy use, the buyer observed. It used to be that with temperatures hitting the 90s in Florida, “we’d be using quite a bit more gas than we are now,” he said.
Despite the OAD extension, Florida Gas Zone 3 and the Florida citygate fell a little more than a quarter and about 20 cents, respectively.
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