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.

Quite a few scattered points, most of them in the East, were flat to nearly 20 cents higher. But a majority of the market recorded losses ranging from 2-3 cents to around 30 cents. The Rockies, Southwest basins and Southern California took most of the biggest hits.

Most if not all cash prices are likely to be firmer Monday following a strong infusion of prior-trading-day screen support. June natural gas futures reconnected with the crude oil market to jump 27.4 cents while June crude established the latest in a long series of record highs by soaring more than $2 to settle just shy of $126/bbl (see related story).

Presumably the market can expect two significant events in the coming week: the restoration of flows at the 1 Bcf/d Independence Hub in the Gulf of Mexico, which would be bearish for Gulf Coast prices by returning a large chunk of supply that had been missing to the market; and implementation of full service on the Rockies Express (REX) western segment to the Panhandle Eastern interconnect in Audrain County, MO, which would be bullish for Rockies prices. In the latest REX-West update posted Friday, the pipeline said it expects to begin full service “on or after May 13.”

Wryly commenting that the completion of REX-West was “only” four-and-a-half months behind schedule, a Rockies producer noted that at a Denver conference last month Kinder Morgan had said REX was moving about 1.2 Bcf/d, “so this last leg should give Rockies producers another 300 MMcf/d in additional takeaway capacity. There is always a lot of pipeline maintenance going on out here [the Rockies] in the spring, which restricts takeaway capacity, and with regional gas demand down about 1.5 Bcf/d from the winter peaks, REX’s additional capacity is much needed right now.”

Daniel Guertin of Lehman Brothers summarized the near-term weather outlook as a cooling pattern being in place across the Midwest and East for the next six to 10 days while “strong warmth” develops in the West. Summer-like warmth has already developed across Texas, where heat indexes were expected to approach 100 degrees in some locations Friday. However, the northern section of the Lone Star state should start cooling off by Sunday as a cold front moves in, Guertin added.

“In the East, the warm pattern observed earlier [last] week has given way to much cooler and wetter weather,” he continued. “…This cool pattern is not only affecting the East, but also the Midwest, Ohio Valley, Great Lakes and Eastern Canada. Elsewhere, temperatures in the western U.S. are in line with seasonal [norms] today [Friday], and this should continue through the weekend. By early next week, however, a much warmer pattern should begin to develop along the West Coast, providing the first extended period of warmth in the Northwest and interior West in several weeks.”

The Southern California border saw Friday’s top decline after SoCalGas issued another high-linepack OFO (see Transportation Notes).

People were trading earlier than usual last week and getting out of the market as soon as possible, according to the perception of one western source. This was especially true on Thursday when cash traders don’t want to have to react to a potentially surprising storage report, he said.

The source said he will have to arrange to trade around a four-day outage of Transwestern deliveries to the California border this week. That will temporarily suspend a sizeable amount of his company’s normal supplies in the California market, he said.

Rising heat levels in interior California mean that PG&E could follow the example of SoCalGas by issuing an OFO as early as Sunday, he continued. It’s starting to get hot throughout much of the West, which should lend support to both electric and gas prices in the region, he said.

Referring to Florida Gas Transmission keeping an Overage Alert Day (OAD) in place for the fourth straight day Friday but with the same lenient 25% imbalance tolerance, a Florida utility buyer said the OAD is primarily intended to “keep the shippers in check.” Temperatures are breaking 90 degrees in some areas of Florida, he said. Noting that ICE had indicated a drop of about 7 cents at Florida Gas Zone 3, he said that was based on too small a sample of deals and he figured that the production-area point had traded around flat. The NGI survey verified flat Zone 3 pricing.

The number of drilling rigs actively searching for gas rose by two during the week ending May 9, according to the Baker Hughes Rotary Rig Count (https://intelligencepress.com/features/bakerhughes/). A loss of one rig in the Gulf of Mexico was more than offset by an increase of three onshore, Baker Hughes said. Its total the tally was up 2% from a month earlier and 1% higher than the year-ago level.

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