Hot weather forecasts for the weekend from Texas through the desert Southwest allowed several points in those areas, along with a few other scattered ones, to swim against the tide of overall softness Friday. A majority of the cash market saw drops ranging from a couple of pennies to about 20 cents.
Moderate weather in most areas, two previous days of screen weakness and Thursday’s bearish storage report kept downward pressure on most prices. But outside of the Rockies and California, which recorded most of the double-digit declines, softening was rather moderate at less than a dime down.
Gas for the weekend wasn’t especially welcome in California, where both of the state’s major distributors extended high-linepack OFOs through at least Saturday (see Transportation Notes). But Permian Basin and Waha supplies found themselves wanted in the intrastate Texas and east-of-California markets, where expected weekend temperatures in the 90s and even 100s would be driving up power generation loads.
The result was increases on either side of a dime for Waha and El Paso-Permian. Flat numbers at Katy and the Houston Ship Channel also testified to the demand being generated by the use of gas-fired peaking power units. And El Paso North Baja/Ehrenberg, which serves the sizzling Arizona market, jumped a whopping half-dollar.
A Houston-based marketer noted that El Paso-Permian and Waha traded as low as the upper $5.40s at first, but rose as the morning went on to the $5.90s in late deals. With Permian basis looking like minus 63 cents for June and the initial daily cash numbers being about 90 cents behind the June screen, that gave ample incentive for buying Southwest supplies for storage injections as well as for immediate burns, he said.
Although he doesn’t trade with Pemex himself, the marketer also suggested that perhaps Mexico’s state oil company may have been buying across the border. “When they [Pemex] need U.S. supplies, they tend to come out and buy in big chunks” from South Texas and the Permian Basin, he said.
There was little weather demand around Chicago, but a couple of area LDCs were buying fairly strongly Friday, presumably for storage injections, the marketer continued. Most prices tended to move a little higher as trading proceeded, he said. Both basis and index deals for June at the Chicago citygate were looking essentially flat as of Friday, he added.
Although Northeast temperatures were forecast to be 10 degrees or so below normal over the weekend and into this week, the gas buyer for a regional LDC said his company actually was seeing smaller markets and system throughput. “We’re putting the maximum amount possible in storage,” he said, but because of injection limits, he was cutting back some on day-to-day purchases late last week.
The price outlook remains generally bearish for this week. Below normal temperatures are expected over the eastern half of the U.S. during the last full workweek of the month. And going into next weekend the National Weather Service expects the below normal readings to expand westward in the upper half of the nation.
Analyst Kyle Cooper of Citigroup made an initial estimation of a storage injection in the mid 90s Bcf to be reported for the week ending May 20.
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