Spot

“Damn the fundamentals; full speed ahead!” as the Civil War’s Admiral David Farragut might have said if asked to analyze the modern-day spot gas market. A smidgen of heating load in parts of Canada and the northern U.S., along with a wee bit of cooling demand from the desert Southwest through the western end of the South, did little to explain rising prices across the board Monday.

Getting a big boost from the jump of 21.7 cents by May futures going into the holiday weekend, spot prices rose by double-digit amounts at all points Monday. Increases in cooling load across the South and some residual heating demand in parts of the West, as well as the return of industrial load following a long holiday weekend, also contributed to the cash bullishness.

Getting a big boost from the jump of 21.7 cents by May futures going into the holiday weekend, spot prices rose by double-digit amounts at all points Monday. Increases in cooling load across the South and some residual heating demand in parts of the West, as well as the return of industrial load following a long holiday weekend, also contributed to the cash bullishness.

There were no blizzards or major heat waves in the near-term sights of the weather radar, but spot prices managed to rebound by large amounts across the board Tuesday from the depths to which they had sunk on Friday. They did have support from both Friday’s 22-cent futures gain (which broke a string of downward sessions) and the return of industrial load from the extra losses it incurs on a holiday weekend.

Cooling load proved to be a stronger influence on the spot market than a Gulf Coast trader had expected Wednesday (see Daily GPI, June 25). Despite the previous day’s 11.8-cent drop by July futures, flat to moderately higher quotes prevailed at most points Thursday of forecasts of highs in at least the mid 80s and often much higher continued to dominate the U.S. weather outlook, while conditions remained fairly mild in most of Canada.

The convergence of abundant natural gas supplies and weak demand, driven by an 8% decline in industrial-sector consumption, will keep the Henry Hub spot price below $4/Mcf until late this year, but economic growth could boost industrial consumption and prices to an average $5.49/Mcf in 2010, the Energy Information Administration (EIA) said in its Short-Term Energy Outlook for June.

The convergence of abundant natural gas supplies and weak demand, driven by an 8% decline in industrial-sector consumption, will keep the Henry Hub spot price below $4/Mcf until late this year, but economic growth could boost industrial consumption and prices to an average $5.49/Mcf in 2010, the Energy Information Administration (EIA) said in its Short-Term Energy Outlook for June.

A price rally this year in the calendar 2010 (Cal10) New York Mercantile Exchange gas futures strip is the biggest threat to 2010 spot price recovery as stronger futures would accommodate more hedging and trigger a stronger drilling response among producers, analysts at Barclays Capital said last Tuesday.

A price rally this year in the calendar 2010 (Cal10) Nymex gas futures strip is the biggest threat to 2010 spot price recovery as stronger futures would accommodate more hedging and trigger a stronger drilling response among producers, analysts at Barclays Capital said Tuesday.