Forced back into action following the Thursday Independence Day Holiday, physical gas traders in quiet trading Friday for weekend and Monday delivery managed to push most price point averages higher by a few cents, except for in the Northeast and California. Coming off dollar-plus losses on Wednesday, a number of Marcellus Shale-related points reversed course Friday to gain 80 cents or more. California was the only area in the red, with multiple points dropping a nickel to 15 cents.
Following Wednesday’s small uptick in front-month natural gas futures, August futures retreated on light volume Friday to close at $3.617, down 7.3 cents from Wednesday’s finish.
Outside of the Northeast, most cash points added from a fraction of a penny to a nickel or slightly more. Many traders had been expecting uninspired trading due to the fact that Friday was isolated between the Independence Day Holiday Thursday and the weekend.
“Things were pretty quiet on the trading front Friday, at least from my experience,” said a northeastern trader. “I’m sure quite a few people seized on Thursday’s holiday to turn it into a long weekend. We’ll see what this market really wants to do when everyone is back to business Monday and the new temperature forecasts are released.”
The two regions that stood out Friday were California and the Northeast. In California, most points dropped from a fraction of a cent to 9 cents. SoCal Citygate came off 4 cents to $3.84, while PG&E Citygate shed a penny to average $3.77. Moderating temperatures were seen as a likely cause.
According to the National Weather Service’s latest six- to 10-day forecast, California should be coming into more seasonable temperatures soon.
In the Northeast, volatility remained the name of the game. Marcellus-related points continue to feel the rubber band effect as constraints and curtailments force day-to-day price swings in the gas supply heavy region. Ahead of the holiday, points in the Marcellus suffered triple-digit declines as moderating weather and pipeline outages and maintenance limited delivery opportunities (see Daily GPI, July 5). Gas on Tennessee Zone 4 Marcellus traded as low as 50 cents, and deliveries to Transco Leidy changed hands as low as 40 cents.
On Friday for weekend and Monday delivery, gas on Tennessee Zone 4 Marcellus had a low trade of $1.20 and finished 79 cents higher than Wednesday to average $1.87, while Transco Leidy had a low of $1.18 and finished averaging $1.72, up 28 cents from Wednesday.
Taking a look back at Wednesday’s 72 Bcf storage injection report from the Energy Information Administration, Jim Ritterbusch of Ritterbusch and Associates said the market was able to “absorb a seemingly dead-neutral storage report by posting a small upward response.” However, he added that over the longer term, he remains bearish in anticipation of fresh price lows.
“At some point the market may need to begin extracting some storm premium if hurricane activity fails to develop by month’s end,” he said. In addition, he noted that production is continuing to exceed most prior expectations.
“As a result of these items and given some difficult comparisons against last year in storage injections, some price weakness would appear to lie ahead following a further advance of around 6-8 cents to the upside,” Ritterbusch said. “Storage injections during the eight-week period ended about mid-August last summer averaged only about 30 Bcf given hot temperatures and associated strength in [electricity generation] demand. This implied year-over-year deficit contraction should deter commercial buying interest while occasional storm activity will likely be viewed as a fresh selling opportunity on the part of the large speculators.”
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