It turned out that Wednesday’s softness was just the cash market taking a breather from this week’s price ascent based on heavy power generation load for air conditioning. The climb resumed Thursday at most points as temperatures approaching and in some cases exceeding 100 degrees will continue to sear the South, Midcontinent and Southwest into the weekend.
Several flat to more than half a dollar lower points, primarily in the West, kept mixed price movement in play. Otherwise, gains ranged from a couple of pennies to nearly 45 cents. A futures increase just shy of 2 cents Wednesday added a wee bit of support to Thursday’s cash quotes.
Northeast citygates participated in the general rebound despite dwindling cooling load. New York City is forecast to see a high of only 75 degrees Friday, while Boston is not expected to get above the high 60s.
Hot weather is also retreating to some extent in the Midwest, but not as much as in the Northeast. Chicago is expected to peak in the mid 80s Friday. But a major heat wave will remain in force across the southern half of the U.S. (except along the West Coast) through the weekend and well into next week.
The Energy Information Administration fell about 10 Bcf short of prior expectations centered around the low 50s Bcf when it reported a 42 Bcf addition to storage for the week ending Aug. 3. Nymex traders didn’t fail to take notice of the bullish development as they sent the September natural gas futures contract soaring by 36.6 cents to $6.586 Thursday.
The screen strength likely was bolstered by a perception that succeeding reports will show that this year’s previously rapid pace of refilling storage has slowed greatly. Besides the likelihood that power generation loads this week siphoned off gas that might have been targeted for injections, Southern Natural Gas reinforced that perception by urging shippers to use their storage withdrawal rights as an alternative source to get around a major offshore supply outage (see Daily GPI, Aug. 9). In an update Thursday, Southern noted that withdrawals from its two storage fields in Louisiana and Mississippi are currently heavy and it reminded customers that it has had an OFO Type 6 in place for short imbalances since last Saturday.
It’s something of a toss-up in calling Friday’s market. The ongoing high levels of cooling load across the southern U.S. and Thursday’s futures spike will be supportive of cash prices, but they will be arrayed against the cooldowns in the Northeast and the Midwest and the usual slump of industrial load during a weekend.
A marketer in the Upper Midwest said her area had been coping with high heat and humidity levels all week until rain cooled it off a bit. Local highs will stay in the 80s through the weekend before a warm-up returns next week, she said. Her company has not bought any spot gas this week because “we don’t like the price,” she said.
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