Cash natural gas prices fell 4 cents overall as traders elected to get their deals done ahead of the Energy Information Administration’s (EIA) weekly storage report.
Losses were widespread, and only a handful of scattered points made it to the win column. The EIA reported an injection of 99 Bcf, which was more than market expectations, and the selling was swift and furious as soon as the number was released. Traders had been expecting an increase closer to 95 Bcf. At the close of futures trading, June had careened lower by 13.8 cents to settle at $3.932, and July was down 13.1 cents to $3.982. June crude oil added 86 cents to $95.16/bbl.
A Florida buyer didn’t think the market would be very active during June. “The market went up to the $4.20s and has come down. I thought it would settle down around $4 and then plateau through some of the summer,” the municipal buyer said. “I think it will trade between $3.90 and $4.10 barring any extraordinary weather event.”
The Florida Gas Transmission (FGT) Zone 3 basis has been active. “Last week it was 8 1/2 cents and now it is bid 9 1/4 and offered at 11 1/2, but last year it was 30 to 35 cents. The basis is weather and demand driven, and in July I think it is going to hit 20 cents or over,” the buyer said.
“In June, I think Nymex is going to do nothing and Zone 3 will do nothing [price wise]. There is nothing that is likely to move the market one way or the other.”
Gulf Coast points were off as much as a nickel. On FGT Zone 3, next-day gas was quoted at $4.04, up 2 cents, but at the Henry Hub Friday deliveries came in at $4.01, down 2 cents. On ANR SE next-day gas was seen at $3.96, 3 cents lower, and Columbia Gulf Mainline quotes came in at $3.97, 3 cents lower. Tennessee 500 L gas for Friday delivery was $4.01, 3 cents lower, and gas at Transco Zone 3 fell 5 cents to $3.98.
Nationally, weather was characterized by some storm activity but temperatures for the most part were expected to be moderate. “A pair of weak to moderate storms will move through parts of the country Thursday, bringing areas of active weather,” said Kari Kiefer, a Wunderground.com meteorologist. “One of these storms will begin the day over the Southern Plains before moving slowly eastward toward the Mississippi Valley. This storm will have the capability to produce moderate rain along with thunderstorms from eastern Oklahoma and eastern Texas through Arkansas. These thunderstorms are not expected to become severe but will have the capability of producing areas of heavy rain and minor flooding.
“The Northeast will rise into the 70s, while the Southeast will see temperatures in the 80s and 90s. The Northwest will rise into the 60s and 70s, while the Southwest will see temperatures in the 80s, 90s, and some 100s in the warmest areas.”
Quotes at Midcontinent points were weaker. Gas delivered for Friday into the NGPL Midcontinent Pool fell 4 cents to $3.90, and deliveries on ANR SW fell 8 cents to $3.84. Quotes on Oklahoma Gas Transmission fell about 4 cents to $3.84, and packages on Panhandle Eastern dropped 5 cents to $3.74.
Double-digit losses were posted by some West Coast locations. Deliveries to the PG&E Citygate fell 4 cents to $4.12, but gas delivered to the SoCal Citygates dropped 11 cents to $4.16. At the SoCal Border, next-day deliveries were seen 11 cents lower at $3.98, and on El Paso S Mainline parcels came in at $4.06, 9 cents lower.
Market pundits see the analytical vagaries of the shoulder season as complete and storage predictions should now be more straightforward. “Analysts tell us that the ‘regular season’ begins this week, folks, that is, the quirky shoulder thingy is done, done, done,” said John Sodergreen, editor of Energy Metro Desk (EMD). “Weather and demand being what they are, this week’s build will undoubtedly be within 5 Bcf of the consensus, but as we said, risk to the high side, not low side. So if we see the number anywhere between 95-100 Bcf, the market should only move because traders are bored.”
Rather than being bored, futures traders had a hunch (incorrect) that the market was anticipating a lower injection number than the consensus. “I think the market is mostly between 95 Bcf and 99 Bcf, but I think some are thinking between 90 Bcf and 93 Bcf,” said a New York floor trader Wednesday before storage numbers came out. “If that’s the case, we’ll run this market up to $4.15 to $4.20. But if it comes out at 100 Bcf to 102 Bcf, then we are right down to $3.90 again.”
Tim Evans of Citi Futures Perspective was looking for a build of 106 Bcf and thought there might be “a bearish surprise,” and analysts at United ICAP calculated an increase of 94 Bcf. A Reuters survey of 26 traders and analysts revealed a sample average 95 Bcf with a range of 90-110 Bcf. The EMD survey resulted in an average 95 Bcf as well. Last year, 56 Bcf was injected and the five-year average stands at 83 Bcf.
Others almost got the triple-digit build they were expecting. EMD said, “The Kilduff report tells us that “prices have gotten some support from the May freeze in the northern half of the country, but the daytime highs quickly obviate any real heating demand. There is lack of weather-related demand across the country right now. The South will not be seeing any real heat, and as just mentioned, the North and East are still unsure that winter has ended.
“Still, the market is grappling with the spike lower from several weeks ago and has been consolidating between $3.90 and $4.00 since then. The storage deficit versus the five-year average and last year remains the key metric in viewing last year as aberrant. Storage levels are rising, and this week will see an above-average 101 Bcf build when reported on Thursday. The first triple-digit injection should allow for a retest of the $3.88 low and generate even more selling.”
Inventories now stand at 1,964 Bcf and are 694 Bcf lower than last year at this time and 83 Bcf below the five-year average as well, EIA said in its weekly storage report.
The Producing region salt cavern storage figure increased by 16 Bcf from the previous week to 228 Bcf, while the non-salt cavern figure rose by 16 Bcf to 569 Bcf, EIA said. The EIA first split Producing Region facility types in storage report footnotes in March 2012 in an effort to provide more comprehensive information on the relationship between inventory changes and types of storage facilities (see Daily GPI, March 26, 2012).
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