Natural Gas Intelligence
Cash Nearly Flat, But Futures Traders Warily Eye Isaac

Thursday, August 23, 2012

The physical market overall gained on average less than a penny Wednesday with most points vacillating within a penny of unchanged. California locations did exhibit gains, however. Futures managed to advance as traders warily kept their eyes on a looming tropical storm now in the eastern Caribbean, and the ultimate trajectory won't be known until the storm makes a critical turn to the north. At the close of futures trading September had risen 5.1 cents to $2.826 and October had added 5.4 cents to $2.863. October crude oil continued its march higher posting a gain of 42 cents to $97.26/bbl.

In the Great Lakes temperatures have eased somewhat and that has been enough to reduce the use of natural gas for electrical generation. "It's been pretty toasty and the high is expected to get to 90 today," said a Midwest utility buyer. "Our power customer is not using the volumes they told us they would, yet we have to nominate the volumes but when they don't use it we have to store it. If we are overstored then Northern Natural charges us a penalty."

The outage of the nearby Fort Calhoun nuclear power plant has had little impact on gas usage, the buyer said. The facility has been offline for a scheduled refueling outage since April 9, 2011. During that time, the employees of Omaha Public Power District were successful in protecting the plant during the historic Missouri River flooding. Returning the plant to operation has been a different story and personnel at the plant have been working to get the plant operational along with complying with the Nuclear Regulatory Commission on current regulatory issues.

Not only will traders have a potential threat in the form of Isaac to deal with, but Thursday's inventory report is likely to show a continued lessening of the storage surplus although at a slower rate. Last year 66 Bcf was injected and the five-year pace stands at 53 Bcf. A Reuters survey showed an average 38 Bcf and United ICAP forecasts an increase of 41 Bcf. Industry consultant Bentek Energy predicts a build of 37 Bcf.

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