Genscape Inc. analyst Joe Bernardi noted a new unplanned curtailment that began Wednesday and was expected to last through Thursday affecting about 100 MMcf/d of SoCalGas receipts from PG&E at the Wheeler Ridge interconnect. “Firm operational capacity will be limited to 270 MMcf/d; previous month-to-date flows were 382 MMcf/d,” Bernardi said. “However, actual flows came in about 20-40 MMcf/d higher than firm operational capacity during a recent smaller maintenance event at this point.” Amid the recent heat-driven spike in the spot market, August bidweek traders have begun to price in some upside risk at the volatile SoCal Citygate. As of Day 2 of bidweek Thursday, fixed price trades at the Southern California point were averaging $9.59, more than double the $3.93 averaged during July bidweek, NGI’s Bidweek Alert shows. Meanwhile, SoCal Citygate August forward prices have increased by a whopping $2.44 over the past week, according to NGI’s Forward Look. While the most dramatic increases along the SoCal Citygate forward curve were seen at the prompt month, which surged to $10.203 as of Wednesday, the rest of the strip also posted substantial gains, Forward Look data show.
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U.S. crude oil inventories last week tumbled more than expected to their lowest level since 2015, the EIA said on Wednesday, as U.S. gasoline and distillate stockpiles fell. Traders said Thursday that inventories at the U.S. storage hub in Cushing, Oklahoma, have continued to fall. They were forecast to have dropped by 1.1 million barrels through Tuesday, traders said, citing energy information provider Genscape.
Genscape Inc. affiliate SpringRock’s estimates Wednesday were showing a 0.9 Bcf/d decline day/day (d/d) in Lower 48 production, though the firm noted that daily pipeline-reported revisions recently have added as much 1 Bcf/d to that total. “The initial top-day estimate based off grossed up pipeline nominations is showing Lower 48 volumes down to 78.65 Bcf/d, led by nearly 0.5 Bcf/d of declines out of the Northeast, about 0.2 Bcf/d of drops in the Gulf of Mexico and a over 0.1 Bcf/d drop out of the San Juan,” Genscape senior natural gas analyst Rick Margolin said. “Northeast estimated declines are spread across all regions, with the largest (0.18 Bcf/d) out of Ohio, led by a nearly 0.11 Bcf/d d/d drop in receipts on REX gathering systems in Monroe County,” Margolin said. “West Virginia’s pipeline sample is also down around 0.1 Bcf/d d/d with more than half the declines occurring on Equitrans’ receipt meter from the Mobley processing plant.” September crude oil was set to open about 6 cents higher at around $68.58/bbl, while August RBOB gasoline was trading about 1.4 cents higher at around $2.1096/gal.
Radiant Solutions was forecasting triple-digit temperatures in Burbank, CA, on Wednesday and Thursday, with temperatures averaging about 13-15 degrees hotter than normal. Genscape Inc. senior natural gas analyst Rick Margolin said Monday’s price spikes came as demand in Southern California reached a summer-to-date high of 3.1 Bcf/d. “The demand is being driven by increased cooling loads and challenges getting both electrons and gas molecules into the market to satisfy those loads,” Margolin said. “Gas-fired generation has been migrating into” the Southern California market “due to challenges importing electrons because of transmission issues, as well as strong power demand in upstream markets.” Genscape monitoring showed the California Independent System Operator (CAISO) “actually exported power to the Desert Southwest” on Monday, he said. As more gas-fired electric generation is occurring in Southern California, “the ability to get gas molecules remains challenging due to ongoing restrictions on importing pipelines, high cost” liquefied natural gas imports from Mexico, “competition for gas with upstream markets and restricted access to SoCalGas system storage.”
Natural gas prices in Southern California surged to the highest in almost a decade as blistering heat kept air conditioners on full blast, stoking demand for the power-plant fuel. Gas in the region more than tripled Monday to $39.64 per million British thermal units, a record in Bloomberg data going back to 2008. Power prices also jumped. “Dangerous heat” will descend across Southern California through July 26, with temperatures above 90 degrees Fahrenheit (32 Celsius) in Los Angeles and approaching 110 degrees in the desert, according to the National Weather Service. “We expected a rally, but nowhere near that big,” Rick Margolin, an analyst with Genscape Inc., said in an email Tuesday.
Starting Tuesday and continuing through Friday, planned maintenance at Natural Gas Pipeline Co. of America’s (NGPL) CS 112 in Moore County, TX, is expected to restrict northbound capacity out of the Permian Basin, according to Genscape Inc. analyst Vanessa Witte. The maintenance is expected to limit volumes from Segment 8 of NGPL’s Permian Zone flowing north through CS 112 into Segment 10 to 0% of contract firm maximum daily quantity, according to Witte. “In the past week, volumes from the Permian onto Segment 8 taken at ‘Sta 167 to Sta 112’ have decreased to around 150 MMcf/d from an average of around 270 MMcf/d since the beginning of the month,” Witte said. “In addition to flow entering Segment 8, receipts at El Paso/NGPL Tap Moore are likely to be cut as these nominations typically travel northbound into Segment 10 as well. “Gas received south of CS 112 will be available for deliveries into Segment 8, however the capacity of the few delivery meters available is not high enough to displace all of the Permian receipts.”
U.S. crude inventories at the delivery hub at Cushing, Oklahoma gained in the most recent four days to Friday, according to information supplier Genscape, traders said. On a weekly basis, stockpiles at the hub were expected to fall for the 10th consecutive week, traders said. The market was also weighed down by concerns about the impact on global economic growth and energy demand of the escalating trade dispute between the United States and its trading partners.
SoCal Citygate cash prices during the week set a new summer record for the location, topping the highs reached during a heatwave last October, according to Genscape senior natural gas analyst Rick Margolin. “Demand on the SoCalGas system has touched 3 Bcf/d for the first time this summer due to above-normal temperatures, hydro output entering its seasonal downturn and issues with importing electrons forcing gas-fired generation inside the market to spool up,” Margolin said. “This also comes as limitations on importing gas and accessing storage remain in place.” The recent volatility in Southern California has also spilled into August forwards. In trading Thursday August fixed price forwards jumped more than 20% day/day to average $7.759, according to Forward Look. Elsewhere in the region, SoCal Border Average gave up 38 cents to average $3.35 Friday, while El Paso S. Mainline/N. Baja fell 23 cents to $3.77.
AECO spot prices have come a long way since averaging in the negatives earlier this year, enjoying relative strength recently driven by “strong flows out of the province to British Columbia (BC) and western U.S. demand markets, where a heat wave and a variety of electric transmission issues are driving large price gains,” Genscape Inc. senior natural gas analyst Rick Margolin said. “This comes as Gas Transmission Northwest is about to kick off some restrictions at Kingsgate, which may cut flows out of Alberta into the Pacific Northwest. However, Alberta outflows have been strong all summer to BC, Saskatchewan and on to the U.S. and Eastern Canada. For the gas summer strip flows out of Alberta are averaging a three-year high at 6.67 Bcf/d, nearly 0.4 Bcf/d above last summer, with July specifically posting a 0.35 Bcf/d y/y gain.” Demand within Alberta this summer has averaged close to 0.6 Bcf/d higher y/y, Margolin said.
A sharp jump in U.S. crude oil inventories also added to the bearish tone in the market. They rose 5.8 million barrels last week, compared to a forecast for a decline of 3.6 million barrels. Despite the jump, inventories at the U.S. oil delivery hub for WTI in Cushing, Oklahoma were forecast to have fallen 1.8 million barrels, or 6.2 percent, through Tuesday, traders said, citing energy information provider Genscape.