Cooling

Cold fronts were either already squelching or about to squelch much of the cooling load that had developed in the East, while the West was a mix of summer-like conditions to the south and unusual chill to the north. Cash prices responded by falling at nearly every point Friday, with only a few scattered instances of flat quotes preventing an across the board sweep of softness.

The continuing decline of heating load in North America, coupled with a lack of substantive cooling load to replace it, caught up with the cash market Thursday and caused moderate price drops at most points. Rockies points took the biggest hits by far, with Northwest-domestic and Opal recording dollar-plus plunges.

Feeding on recent futures strength and slight cooling trends in northern market areas, prices ranged from flat to about 40 cents higher at a large majority of points Wednesday. Texas Eastern-Kosciusko in the Gulf Coast and Transco Zone 6-New York City were the only contrarian points to see modest losses of up to a nickel.

Prices managed to rise at nearly all points Thursday, boosted by cooling trends in northern market areas, continuing cold in mountainous parts of the West and ongoing momentum from three preceding days of futures gains this week. But Thursday’s 36.5-cent screen reversal (in response to a moderately bearish 5 Bcf weekly storage injection), combined with the weekend loss of industrial load and the fact that little if any especially severe cold was in the offing, made it likely that softness would prevail in the cash market Friday.

The September aftermarket got off to a very weak start in most cases Thursday. Nearly all points plummeted by anywhere from 35 cents to 90 cents Thursday as cooling load continued to shrink and Wednesday’s screen dive of nearly 60 cents applied negative pressure on physical prices.

As the winter heating season winds to a close, the natural gas industry is now looking towards the summer cooling season and the Atlantic hurricane season for indicators on the direction of natural gas prices. Special attention is being paid to the 2006 Atlantic hurricane season, which forecasters expect to be overly active. Focus on the hurricane season is even greater as Gulf of Mexico oil and gas producers continue to pick up the pieces six months after Hurricane Katrina’s devastation.

Transwestern will reduce WT-2 Station capacity by 120,000 MMBtu/d Thursday due to unplanned maintenance involving repair of a cooling tube. Ten points will be affected by the cut. WT-2 will return to normal capacity of 600,000 MMBut/d Friday.

Almost certainly in response to the imminence of Tropical Storm (potentially Hurricane) Katrina bringing cooling rains to the southern half of its Florida market area, Florida Gas Transmission ended Thursday an Overage Alert Day notice that had been initiated Aug. 10 and had tolerances for negative daily imbalances varying between 5% and 25% during its two-week run.

Having lost prior-day screen support Monday and being on the verge of losing some cooling load in the Great Lakes market area Wednesday, prices fell across the board Tuesday. The fact that an expected warming trend in the Northeast is slow in developing also contributed to a bearish cash market mood.