Ignoring cooling load that was dwindling for the weekend in some areas and staying light to moderate at best in several other regions, the cash market relied almost entirely on the previous day’s futures spike in recording gains at a large majority of points Friday. Prices also were essentially unfazed by the drop of industrial demand in a weekend market.
The Rockies (along with the Florida citygate) constituted the odd market out of overall price advances ranging from about a nickel to a little more than a quarter. Reflecting temperatures continuing to peak in the mid 90s to 100 area in much of Texas, Houston Ship Channel and Katy saw two of Friday’s biggest price increases. Waha numbers also were strong.
Despite highs due to remain on either side of 90 Saturday in parts of the Rockies, the region couldn’t find enough demand elsewhere, especially to the east in the Midwest, to avert losses from a couple of pennies to about a dime Friday.
Although Florida Gas Transmission kept an Overage Alert Day in effect for at least a fifth day Friday, utility buyers in the Sunshine State apparently expected it to end soon as they drove citygate numbers about 20 cents lower.
August futures will have neutral guidance for Monday’s cash market; Friday’s indecisive wavering back and forth for much of the session to either side of unchanged seemed appropriate after the contract finished the day up an almost-invisible 0.1 cent (see related story).
There was no threat to Gulf of Mexico production, but a tiny amount of bullish market buzz may have been generated by a tropical wave about 700 miles west-southwest of the Cape Verde Islands off West Africa and moving westward at 15-20 mph early Friday afternoon, according to the National Hurricane Center. The agency accorded the wave a low chance of becoming a tropical cyclone over the weekend, but it was the first tropical Atlantic activity with potential for any significance since late June (see Daily GPI, June 29).
Although PG&E projected California Gas Transmission system linepack being near its minimum target level during the weekend and sinking below that level Monday, it did not issue an OFO. Malin and PG&E citygate quotes were up about 20 cents each.
A late-week warmup in the Northeast proved to be short-lived as highs there were predicted to drop back into the 70s over the week. The Midwest was due to remain at subnormal mercury levels, with several locations not expected to reach the 70-degree level again Saturday.
Meanwhile, Alberta was expected to see abnormally warm highs on either side of 90. But the really major source of gas-fired power generation load for air conditioning still stretched from Texas through the desert Southwest and interior California, accompanied by lesser but still meaningful heat levels from Louisiana and Arkansas eastward through the eastern end of the South.
But recent highs around 100 or more in the Midcontinent were becoming only a memory as Oklahoma City and Tulsa were forecast to peak in only the mid 80s Saturday.
A Gulf Coast producer was adamant about it: Friday’s general cash advance was all futures-based and weather load had virtually nothing to do with the rally.
A Midcontinent producer confessed to being “perplexed” by the price strength Friday, even after the big futures jump a day earlier. He said he could have bought gas into intrastate OGT as low as $2.95 Friday (actual OGT quotes didn’t get any lower than about $3) “but I didn’t have anywhere to take the gas.”
The producer said he expects mostly moderate weather to weigh more heavily on the market Monday, resulting in lower cash quotes. The Midcontinent will have a somewhat mild midsummer weekend but can expect to start getting hotter again toward the end of this week, he said.
He noted that the national forecast for the coming week calls for a mostly cooler-than-normal eastern half of the U.S. and above-normal temperatures in the West. That portends a generally bearish market, he said, because it will be the much more densely populated East experiencing the reduction in normal cooling load.
Another producer continued to press his case for heat in the Midwest not mattering much to the summer gas market in comparison to seasonal conditions in the South-Central U.S. “This comment [below] from the EIA [Energy Information Administration] shows how important [to summertime gas demand] Texas is,” he said Thursday, adding that Oklahoma and Louisiana also rank among the top 10 states for gas use in power production. “It’s the weather in these areas that’s keeping storage reports decent, not any big drop in production that so many analysts cite as the reason for better storage numbers lately.”
According to the EIA report, “The weaker-than-average storage injection [of 90 Bcf for the week ending July 10] occurred despite temperatures during the report week that were slightly cooler than the previous year and the normal temperature…The average temperature for the United States, 72.6 degrees during the report week, compared with 74.4 degrees for both the same week last year and the normal temperature. However, temperatures in the West South Central Census Division, which includes Texas, Louisiana, Arkansas and Oklahoma, averaged 84.3 degrees, which was 2.1 degrees higher than the normal temperature and 3.6 degrees more than the previous year. This…was the only region with temperatures warmer than normal and warmer than last year.”
The producer had one further comment: “At the other extreme misreading by analysts, there is not one Midwestern state among the top 10 in gas consumed for power production. Temperatures in Chicago just don’t matter in the summer.”
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