Natural gas futures dropped lower at the open Tuesday as traders returned from the holiday weekend to a less than supportive fundamental outlook. In addition to the milder temperatures expected in September, weather forecasters also played music to bears’ ears by predicting that Hurricane Fabian poses more of a threat to New England than to the Gulf Coast states. The October contract was hit heaviest by the selling, dropping 9.2 cents to close at $4.639. At 63,392, estimated volume was moderate.
Articles from Returned
In responding to a complaint from British Columbia-based Powerex to have its collateral returned, the defunct and bankruptcy-restricted California Power Exchange (Cal-PX) fired back last Tuesday asking FERC to set generic guidelines on the distribution of nearly $1 billion in collateral from about 30 energy merchant sector participants that is held under Cal-PX’s caretaker administration. Cal-PX has made this same request in two other individual collateral cases brought before the Powerex one.
After showing much strength going into the weekend, prices returned to major softening mode in most cases Monday. Dollar-plus declines reigned throughout the East and approached $6 at Chicago citygates despite a sizeable snowstorm being expected to hit the city Tuesday afternoon.
Amid three distinct selling surges, natural gas futures returned to pre-hurricane (Isidore and Lili) levels Thursday as traders grappled with a one-two combination of bearish news. The first blow came before the open when traders learned that Hurricane Lili had weakened prior to landfall. Still reeling from that, traders were again stymied upon learning that a greater-than-expected 47 Bcf was injected into storage last week, according to the Energy Information Administration. Then after holding support at $3.78 for much of the afternoon, the November contract broke lower in the final 30 minutes of trading. It closed at $3.724, down 43.6 cents for the session and more than 50 cents beneath its $4.25 peak notched during the height of the hurricane hype Tuesday.
Although stability has returned to California’s electricity markets, those markets face many remaining challenges that, if not handled correctly, could easily throw the state and the broader interconnected Western grid into renewed chaos, the California Independent System Operator (Cal-ISO) recently told FERC.
The cash market began what several sources believed could be a fairly lengthy period of downward price consolidation Wednesday. Numbers generally fell between a dime and 20 cents in eastern markets and at Permian Basin/Waha and Pacific Northwest points, while other western prices took an even heavier beating.
Traders returned to a fairly quiet market Monday in which prices increased by about a dime or less at most eastern points but by considerably larger amounts in the West. California was heating up rapidly and registered triple-digit recoveries from weekend softness.
Sea Robin reported completing an investigation of a leak in its “J” leg segment (see Daily GPI, May 16). The “J” leg is being returned to service after the leak was isolated on the lateral serving Eugene Island Block 305 (receipt location 94027), Sea Robin said. It resumed taking nominations for Thursday’s gas day at all affected points except for location 94027.
Cash prices rebounded virtually everywhere Monday except in California as traders returned from the long Good Friday/Easter weekend. Most gains were between about a dime and 15 cents, with the Rockies seeing mostly smaller ones that ranged from flat to up about a nickel, and points in the Northeast and Appalachia registering larger advances of about 20 cents or more.
California legislators and regulators returned to work after the Easter holiday with a full plate of actions pending in the state’s electricity crisis, including the implementation of last week’s agreement between the governor and Southern California Edison Co. Meanwhile, the negative fallout from the utilities’ credit-worthiness problems continues to add pressure for faster state action.