Losing both a bit of air conditioning load and residual futures support, prices saw double-digit declines that ranged as high as half a dollar at a majority of points Tuesday. The West, where a heat wave has come on strongly in a region that had experienced mostly cool to moderate temperatures prior to this week, and the still-torrid Midcontinent cornered the market on points that were flat to less than a dime lower.
Cash softness is likely to continue Wednesday after the screen fell nearly 20 cents. Crude oil for July delivery also dropped on its expiration day (47 cents to $58.90/bbl) only a day after hitting an all-time daily settlement high of $59.37.
A marketer noted that a cold front in the Northeast and severe thunderstorms in the Upper Midwest were due to bring thermometer levels a few degrees lower in those regions Wednesday. Another bearish factor in the cash market, he said, was that futures kept falling in overnight trading after Monday’s slightly lower settlement, and the screen weakness in Tuesday’s open-outcry session also tended to pull late quotes down. Chicago’s Wednesday high, expected to be in the high 70s, would be about 5 degrees down from Tuesday, the marketer said, and he was expecting an even bigger citygate selloff than the quarter loss that actually occurred.
Permian Basin/Waha numbers were flat as gas there was getting pulled in several directions — west toward the sizzling east-of-California and inland California markets and east and north to the intrastate Texas and Midcontinent markets, where heavy air conditioning use continued to boost power generation load. Transwestern-West Texas recorded the day’s only significant gain.
A total shutdown of Westcoast’s McMahon Plant for annual turnaround, which began Tuesday, was having essentially no impact in boosting Sumas prices by taking a big chunk of British Columbia supply off the market (McMahon was processing more than 500 MMcf/d last week prior to a turnaround-related partial outage that started Thursday). Sumas quotes fell more than 15 cents Monday, and although Northwest-domestic fell about a nickel more, the domestic gas still averaged nearly a dime higher. Northwest-South of Green River was flat.
Quite a few gas traders are out of their offices through Thursday because of the Omaha Gas Association hosting events for them related to the College World Series, one source observed.
A Gulf Coast producer was trying to get some early July bidweek action going Monday and Tuesday, “but nobody wants to play” yet, she said.
A Houston-based marketer reported seeing these basis bid-offer spreads for July, but said he wasn’t aware of any deals being done yet at such prices: Chicago citygate, minus 6.5-6 cents; Waha, minus 53-51 cents; and El Paso-Permian, minus 63-62 cents. Basis had tightened since Monday due to Tuesday’s futures weakness, he said.
The marketer thought a fair amount of people will be trading July gas Friday, but acknowledged that many will prefer to wait until after weekend, when fresher weather forecasts and futures data will become available.
The Northeast, Midwest, Great Plains, Midcontinent and upper Southeast are where the National Weather Service predicts above normal temperatures during the June 27-July 1 workweek. It expects below normal readings everywhere south and west of a line going south through western Montana and eastern Idaho and Utah before curving southeastward through northeastern New Mexico and central Texas to the Gulf Coast at the Texas-Louisiana border. The federal agency also looks for below normal temperatures in Florida (except for the western end of the Panhandle), the southeastern corner of North Carolina and the coastal sections of South Carolina and Georgia.
“Our confidence is very low as the models are all over the board,” said Citigroup analyst Kyle Cooper in making his final estimation of a 70-80 Bcf build in storage inventories to be reported for the week ending June 17.
Thomas Driscoll of Lehman Brothers looks for an injection of 80 Bcf “based on the weather and historical trends. High cooling demand (66 CDDs [cooling degree days]) last week compared to the five-year average (52 CDDs) suggest a negative weather effect on storage injections. Our estimate for the week is based on adjustment of the five-year average rather than the prior week’s injection because we believe coal power would have taken over some of the air conditioning demand as the heat wave progressed.”
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