Softening

In a quiet weekend market prelude to the beginning of June bidweek, prices fell in mostly moderate amounts Friday. However, OFOs declared for Saturday by both of California’s huge distributors (see Transportation Notes) had an impact felt throughout much of the West, where all of the declines of more than 20 cents were recorded.

The expected softening materialized at nearly all points Wednesday. But although mild to cool weather in most regions argued for price slides to continue Thursday, a big screen rally threw some doubt on upcoming cash market movement.

Cash prices began what could be an extended period of softening through the end of May with across the board declines Tuesday that were fairly substantial in ranging from a little less than a dime to nearly a quarter. Most of the larger losses were recorded in the West.

With some of the new-found air conditioning load that had helped support prices at midweek starting to fade again and chilly weather in the Rockies and north-central U.S. moderating from the other direction, cash quotes ranged from flat to down a little more than a dime at nearly all points Friday. The slump in industrial demand typically associated with a weekend also contributed to the generally mild bullishness.

As anticipated, the combination of generally mild weather forecasts, lower load over a weekend and the previous day’s weakness in energy futures caused prices to range from flat to less than a dime lower at a majority of points Friday. However, decreases of more than a dime were clustered in the West, where a heat wave earlier in the week continued to abate.

Moderate softening continued in the swing market Thursday for the most part, but points here and there were flat or eked out tiny gains. Except for some lingering chill in the Upper Plains, Rockies and Western Canada, temperatures were converging toward pleasant levels appropriate for mid-spring in nearly all other regions (cooler in the Southwest and warmer in the Northeast). However, a cold front was due to move into the Midwest by the weekend.

Except for losses getting a little larger and extending to as much as 20 cents or so, Monday’s swing market was almost a carbon copy of that on Friday — mostly moderate declines with a smidgen of firmness at a few points.

This week’s price trend, which began with mostly moderate firmness Monday and shifted Tuesday to a mix on either side of flat, continued to the downside Wednesday. With mild weather across the southern tier of states and no more than normal cold conditions elsewhere in the U.S. and Canada, all points were united Wednesday in losses that ranged from just under a nickel to more than 30 cents.

Sources expect Tuesday’s generally mild softness to continue as air conditioning load recedes in the East and there is no near-term tropical storm threat to offshore Gulf of Mexico production. As if to reinforce their outlook, the energy futures complex experienced steep price dives Tuesday, with the August natural gas contract falling nearly a quarter and its crude oil counterpart plunging about $2 in expiration-day profit taking.