Summer officially began early Tuesday morning, and it’s highly unlikely that many people will be mistaking it for any other seasons. Actually it will be feeling more like typical midsummer heat throughout much of the U.S. Tuesday, and the big boost in power generation load, aided and abetted by residual screen strength from late last week, sent cash prices higher by double-digit amounts in most cases Monday.
A few Gulf Coast points only managed gains of 4-9 cents or so, but in the rest of the market upticks ranged from about a dime to nearly 75 cents. The Midcontinent and West recorded most of the largest increases.
Some may have been curious to see projected highs in the low to mid 70s Tuesday for Los Angeles and San Diego, and then wonder what was driving the advance of more than 70 cents at the Southern California border Monday. Well, it seems there will be light weather-related load all along the oceanside parts of the West Coast Tuesday, but the key was to look inland, where Sacramento’s forecast high of 87 degrees was more representative of Golden State weather away from the coast.
With the exception of the Pacific coastline and some fringe areas along the Canadian border, it was hard to find anywhere in the Lower 48 states where temperatures will not be reaching the 80s or above Tuesday. Phoenix is expected to peak at 111 degrees (which helps account for El Paso North Baja/Ehrenberg and Kern Delivery in the desert Southwest racking up Monday’s biggest gains of all). Even Denver is due to sweat it out with a high in the mid 90s.
A screen settlement of 2 cents lower Monday (after seemingly spending the open-outcry session wandering all over the place), followed by a further retreat in after-hours Access trading, suggested that futures support for cash quotes is fading. However, the crude oil market was still going gangbusters, with crude for July delivery setting yet another record by jumping 90 cents to $59.37 as worries continued to mount about political stability in Nigeria, Africa’s largest oil exporter.
“I guess it’s hot in a lot of places,” commented a marketer in reference to the cash market’s strength. But a storm is coming into the Midwest Tuesday that’s expected to lower temperatures a bit at Chicago and other area citygates, he said. Comparing cash and futures, he noted that Chicago delivered prices were about 40 cents back of the screen in Friday’s trading for weekend, but Chicago’s rise of 30 cents Monday had shrunk the spread considerably to about a dime.
Due to the further decline in Monday afternoon Access deals, the marketer said he expects moderate screen softness Tuesday. It was more difficult to call the physical market, where the new influx of heat may keep a floor under prices, he said.
A Gulf Coast producer was hardly surprised by the market’s strength. She reported having “a power plant guy” tell here it’s going to be around 100 degrees each day this week in the Little Rock, AR area, “and it’s much earlier than usual for them to be feeling such high temperatures.” In a market like the current one, it helps to have several power plants as regular customers. She considered Monday’s gains almost purely weather-driven.
The producer added that she was “amazed” to see the February 2006 futures contract trading around $9, but that’s the strip peak. Then the March 2006 screen drops to “only” $8.89 at this point, she said. July Access futures were dipping into the low $7.60s at mid-afternoon following the daily settlement at $7.670, she noted; unlike the marketer, she thought that might be signaling a consolidation Tuesday of Monday’s cash gains.
To a Northeast utility buyer, the high-price environment was getting even worse, “so we’re trying to get along as much as possible on monthly baseload and augmenting that with small daily purchases” only to the extent necessary. The industry is still in the first half of storage injection season, so there’s no rush to fill accounts, he said, noting that his company was ahead of the game in that regard already.
Citigroup analyst Kyle Cooper said his initial estimation of the storage report for the week ending June 17 was “very similar to the prior report” in the low 70s Bcf.
©Copyright 2005Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |