Prices fell across the board Tuesday as traders had anticipated, and most declines were larger than the ones on Monday. The usual suspects depressed the market: little hot-weather load in most areas, the previous day’s futures plunge, a sense of burgeoning storage inventories overall (despite the fire loss at the Moss Bluff facility) and a streak of no tropical storm threats to offshore production that is approaching two weeks now.
Most price dips ranged from a little less than a dime through the teens, but the San Juan Basin fell more than 20 cents to lead western losses that tended to be among the day’s largest. The West’s market weakness was exemplified by PG&E’s declaration of a high-linepack OFO (see Transportation Notes). Also, Kern River is reporting high linepack in its farthest downstream segment again this week after having returned to normal conditions systemwide last week.
A minute warming trend in the South is proving unable to boost power generation load for gas by any significant amount, while high temperatures in the Northeast and Midwest market areas remain mired in the 70s or unable to get above the low 80s respectively in most cases. The West is still seeing triple-digit readings in the desert Southwest, but otherwise has cooled off from the type of weather that made it the nation’s hottest region for most of this summer.
The screen finally managed a small gain for the day Tuesday after being negative during the morning, but the continuing retreat of petroleum-related futures made that unlikely to rally cash prices Wednesday, one source said.
“These cold fronts just keep on coming” into the Northeast from Canada and keeping cooling load low, said a Gulf Coast producer. Everything is weak, with nearly all Gulf Coast/Northeast basis “getting crushed down to variable transport costs,” he said, adding that “the only one that’s still in the money — by a couple of cents — is Transco Zone 3 to Zone 6. It’s been like that for a few days.”
The producer noted that weather in the Northeast, his primary market area, is due to get warmer in the mid 80s Saturday through Monday, but prices should stay weak because it will be for a lower-demand weekend period. He noted that the upcoming storage report will have to account for about a 6 Bcf drop related to last week’s explosion and fire at the Moss Bluff facility, but traders are still expecting surpluses to a year ago and the five-year average to get larger.
Weather support for gas prices is similarly bearish in the Lower Midwest, said a utility buyer there. “It will be warming up over the next couple of days, maybe getting to 90 Thursday, which might get a few air conditioners turned on,” he said, but then it’s back to cooler temps over the weekend. The buyer noted that although the Lyons, KS storage facility of Northern Natural Gas is essentially closed to interruptible injections currently (see Daily GPI, Aug. 20), it’s not a problem for him because his utility is a firm customer.
The National Weather Service expects normal temperatures in most of the U.S. during the Aug. 30-Sept. 3 workweek. It predicted below normal readings in Montana, Idaho, Washington and Oregon and in northwest Wyoming and far Northern California. The agency anticipates above normal temperatures from Wisconsin and Michigan through New York and New England, and also in an oval area encompassing parts of the Midcontinent and Southeast from Oklahoma and North Texas to the western edges of Georgia and North Carolina.
Lehman Brothers analyst Thomas Driscoll reported expecting a storage injection of 80 Bcf to be announced for the week ended Aug. 20.
People are starting to do “a little” September business, a Northeast trader said, and prices apparently will be “the weakest so far this summer.” Everything is looking like it will be index-minus, he added. He reported hearing this early basis talk (all plus in cents): upper 30s for Transco Zone 6-NYC and Texas Eastern M-3; mid 30s for Zone 6 (non-NYC); and low to mid 20s for Columbia Gas.
The Midwest utility buyer cited above said his suppliers were mentioning basis of minus 25-26 cents at Northern Natural’s demarcation point. “We might see around a $5 index for demarc or even lower,” he said.
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