Softness

The midweek buildup of heat in many sections of the U.S. and Eastern Canada was able to overcome further prior-day screen softness in spurring rebounds in most of the cash market Thursday. However, it’s highly unlikely that gains will continue Friday after a very bearish storage report led to a steep plunge in August natural gas amid another meltdown day in Nymex’s energy futures complex.

As a couple of producers had expected (see Daily GPI, May 9), softness dominated the cash market Friday. A cooling trend in the Northeast proved to be short-lived, and while weather-based demand was growing a bit here and there, the overall temperature picture remained fairly moderate. A 6.4-cent futures loss the day before and the drop of industrial load during a weekend contributed to the general bearishness.

As a marketer had predicted the day before, cash prices dropped at nearly all points Friday. The softness was due to moderate weather conditions typical of a shoulder month being prevalent in most regions, Thursday’s nickel dip by May futures and the decline of industrial load during a weekend.

It turned out that Wednesday’s softness was just the cash market taking a breather from this week’s price ascent based on heavy power generation load for air conditioning. The climb resumed Thursday at most points as temperatures approaching and in some cases exceeding 100 degrees will continue to sear the South, Midcontinent and Southwest into the weekend.

Softness continued in most of the cash market Wednesday, but unlike the double-digit drops that were predominant the day before, nearly all of Wednesday’s declines were around a dime or less. Prices again were weighed down by dwindling cooling load, especially in the eastern end of the South (Atlanta’s high was predicted to fall from around 80 Wednesday to 73 Thursday), and by prior-day futures weakness.

Softness was moderately predominant in a mixed pricing environment Monday. Forecasts of pleasant to cool conditions Tuesday in the Midwest, Northeast and eastern end of the South resulted in drops at a majority of eastern points, although most of the Midcontinent recorded substantive gains.

Several moderate gains in the Rockies and a few other instances of flat quotes prevented an across the board run of price softness Thursday, but it was clear that the cash market was weakening as a large majority of it recorded falling numbers. Power generation buying for cooling load is dwindling across the southern U.S., and heating load in northern market areas is fairly minimal and largely confined to overnight low-temperature periods.

Prices that were flat to about 15 cents higher at several western points averted a clean sweep of cash market softness Monday. Overall, traders responded to prospects for spring-like weather with little heating load in most areas this week, along with Friday’s futures dip of 15.6 cents, by pushing prices anywhere from a couple of pennies to about 45 cents lower at a solid majority of points. Many of the largest losses were concentrated at Midwest and Northeast citygates.

A barely higher Cheyenne Hub in the Rockies was the only point that avoided falling prices Wednesday. The factors that have caused softness in post-Christmas trading at nearly all points were unchanged — light heating load due to unseasonably moderate weather for late December, prior-day futures weakness and bearish attitudes about abundant storage.