Prices continued to fall at most points Thursday as prior-day screen weakness, moderate cooling load outside the southern half of the U.S. and the lack of a viable new tropical storm threat continued to weigh on the cash market. However, rising temperatures in the Northeast after an unusually cool spell for mid-August generated flat to more than 15 cents higher quotes at most regional citygates.
A couple of flat to slightly higher Gulf Coast points and a flat NOVA Inventory Transfer joined the Northeast in keeping mixed price movement in play. But the overall market extended the losing streak that has dominated this week after concerns about Hurricane Dean’s threat to offshore U.S. production dissipated. The majority of losses ranged from 2-3 cents to a little more than $1.30.
The high end of the decline range was a bit deceptive because most points fell no more than about 30 cents. The Florida citygate’s drop of just over $1.30 and the Florida Gas Zone 3 slide of more than 65 cents were definitely not representative. They occurred despite Florida Gas Transmission extending an Overage Alert Day (OAD) through at least Thursday (see Transportation Notes), but its loosening the negative imbalance tolerance to a very lenient 25% undoubtedly led many shippers to expect the OAD to be lifted Friday.
The Energy Information Administration fell short of consensus expectations centered around 30 Bcf when it reported a 23 Bcf storage injection for the week ending Aug. 17. Though analysts say virtually every storage report has been factored into trader psychology in advance in recent years, Nymex traders seemed uncertain how to respond, as the September futures contract spent some time in the red after the report before ending the day with a 4.4-cent gain.
There was some convergence of cash and screen Thursday, but Henry Hub still had about a dime’s worth of premium over prompt-month futures.
It’s getting warmer in the Northeast, with New York City expected to see Thursday’s 79-degree peak climb to around 87 Friday. That’s far from a heat wave, but it was enough to give moderate support to citygate numbers. Cold fronts will keep high temperatures subdued for a while longer in the Midwest, and one will occupy the Pacific Northwest through the Upper Plains this weekend. Even the South will stop peaking in the 100s early next week due to a cold front, according to The Weather Channel.
Although it was not flooding in her area, an Upper Midwest marketer said she had to believe the flooding that is devastating sections of the Midwest currently is causing significant demand destruction in the region, both due to power outages and businesses closing due to high water. Her company started buying daily gas again this week for a couple of customers “because they like the prices better now,” she said. She expects cash softness to continue, saying there’s not enough heat to make a difference and there’s no new storm threat in sight.
A utility buyer in the Lower Midwest said the flooding was mostly to the north of the company’s service area, and “everything is up and running here.” However, a “bad storm” on Monday still had about 200 local residents without electricity Thursday. The area is cooling off a lot through the weekend, but will be warming again to around 90 early next week, she said.
A West Coast source reported unusually cool coastal temperatures contrasting with much warmer weather inland. Index premiums for September are looking pretty tight, he said, adding that he’s seeing El Paso’s San Juan-Blanco pool trading at index plus 0.25-0.5 cent. Bidweek is rapidly approaching but nobody is in a hurry to buy, he said. “The utilities are not motivated, and it’s a case of who’s going to blink first,” he added.
The source reported seeing a “lot of capacity release offers for September out there” in the Southwest, which told him that shippers are expecting typically weak shoulder-month demand and trying to peddle capacity they won’t be using. There’s no doubt that September indexes will record big drops, he added.
Reflecting the market’s general weakness this summer, the source said winter and one-year term business at the PG&E citygate is “about a buck cheaper than three months ago.” Many buyers’ risk management people are in what he called “analysis paralysis.” They insist on buying at the bottom, he said, “and I tell them, ‘You guys are pretty good about picking tops, but not so good at determining bottoms.'”
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