Strong support from a day-earlier screen spike and the continued approach of Tropical Storm Emily to the Gulf of Mexico (GOM) production area had only limited success in sustaining firmer prices in the East Wednesday. But a record-setting heat wave occupying much of the West was more successful in generating the day’s biggest price increases in that region.
There was a moderate bias to the upside in eastern quotes that ranged from a dime lower to nearly a dime higher, with many points close to flat. The West had a few points that fell 3-5 cents or so, but otherwise quotes ranged from flat to about 20 cents higher.
Minerals Management Service reported a big drop in offshore shut-ins resulting from Hurricane Dennis. Shut-in gas had fallen to 1,030 MMcf/d MMcf/d Wednesday, down from the 4,297.1 MMcf/d reported Tuesday, MMS said. The agency called Dennis-related damage to GOM facilities “extremely light” (see related story).
One reason for the mildness of Wednesday’s eastern upticks was the fact that Emily was moving toward a more southerly and westerly course than expected earlier. Dennis had passed between Jamaica and Cuba on its way to the Gulf. As of Wednesday afternoon the National Hurricane Center’s (NHC) projected tracking for Emily had that storm due south of Jamaica, away from the Cuban side, by about midday Saturday. A continuation of such a track beyond that would take Dennis straight over the center of Mexico’s Yucatan Peninsula.
NHC said a “strong” Emily was about to reach the Windward Islands Wednesday afternoon but was not expected to strike the islands as a hurricane. “However, hurricane force winds are possible over elevated terrain,” it added. At 5 p.m. AST the center of Emily was about 125 miles south of Barbados and about 135 miles east-southeast of Grenada. The storm was moving toward the west at near 18 mph, and a turn to the west-northwest was expected during the next 24 hours, NHC said. Maximum sustained winds were near 60 mph; 74 mph is the threshold for hurricane classification.
Although an Upper Midwest marketer said it was “getting toasty warm and humid here,” temperatures in the northern market areas are generally seasonal and not conducive to large amounts of cooling load. In fact, a weak cold front was approaching the Northeast from the northwest. The South is experiencing typical mid-July highs in the 80s and 90s, so it was a source of a fair amount of power generation demand for air conditioning needs.
But it’s the West that has thermometer mercury threatening to bust out of the tube. Record date-specific high temperatures and record power usage (see story in Power Market Today) are likely to continue Thursday for most of the region south of the Pacific Northwest and northern Rockies. Heat warnings were being posted for southern Nevada, parts of southeast California and northwest Arizona, The Weather Channel said, adding that highs are forecast to rise to around 120 degrees Thursday in such places as Death Valley, CA, and Lake Havasu City, AZ.
The western heat helped to mitigate the negative price impact of a high-inventory OFO issued by PG&E (see Transportation Notes). Malin and the PG&E citygate were flat.
The Upper Midwest marketer said her company is buying very little spot gas lately because of high prices. She noted that “if we’re lucky,” Emily will wear itself out over the Yucatan Peninsula.
“Seasonal” temperatures in the Northeast are making it very difficult to find any incremental power generation load, a regional trader said. He reported being surprised at Tuesday’s price strength and “surprised again today” that cash wasn’t softer than it was, despite Tuesday’s screen spike. He noted that Gulf Coast-Northeast basis spreads are staying fairly normal this week after getting crushed late last week.
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