Cash prices disconnected once again Friday from "following the screen," but this time instead of strengthening after prior-day futures weakness as they had done on Tuesday and Wednesday, most points dropped despite Thursday's 17-cent Nymex gain.
Moderating weather fundamentals, the industrial load decline associated with a weekend and the growing perception of tremendous demand destruction caused by Hurricane Katrina outweighed continuing concerns about still-massive offshore shut-ins.
The market made it a full week of mixed pricing; movement was decidedly up or down for most points each day, but there were always a few exceptions. So it was again Friday. Although a solid majority of points fell anywhere from a couple of pennies to a little more than half a dollar, flat to nearly a dime higher numbers were tucked into the mix here and there.
After two days of triple-digit additions to the roster of restored Gulf of Mexico production, progress slowed dramatically again. Minerals Management Service (MMS) counted shut-ins totaling 3,383.84 MMcf/d Friday, down a relatively paltry 27.15 MMcf/d from the day before (see related story). Cumulative deferred production since Aug. 26 rose to 105.777 Bcf Friday, equivalent to 2.898% of the Gulf's normal 3.65 Tcf yearly production, MMS said.
Although temperatures had previously been falling in northern and western market areas and to a lesser extent in parts of the South, it wasn't until Friday that cash traders finally bowed to the decline in power generation load in sending prices lower. Some heat would be returning in the South over the weekend, but most of the U.S. faced mild to cool weather, according to The Weather Channel.
Sizeable drops at Waha, Katy and the Houston Ship Channel signified declining air conditioning load in the intrastate Texas market. A marketer noted that a cold front had already passed through North Texas, creating pleasant conditions Friday in the Dallas-Fort Worth area, and should be doing the same for the Houston area by Saturday.
A producer noted that although heat and high humidity had persisted in the New York City region through Thursday, the Northeast was "very comfortable" Friday and would remain so through the weekend. He said his company is "still trying to make sense" of what supplies are available and where in the Gulf Coast. He reported hearing "rumors" that Tennessee's 500 Line will remain closed for the indefinite future, but said that might just reflect "a worst-case scenario."
The producer said he was already doing paperwork Friday afternoon to get ready for the October bidweek. "We never get caught unawares, but it seems like it [bidweek] is always coming up sooner than expected," he said.
According to Bentek Energy's analysis of nominated throughput posted on pipeline bulletin boards, Tennessee and Southern Natural Gas continued to be most affected by Katrina production outages. Compared with Aug. 26 flows, they were down 1,184 and 839 MMcf/d respectively as of Friday, Bentek said. Other significant losses noted by Bentek included Destin, which was down 576 MMcf/d despite some midweek recovery of production, and Mississippi Canyon, which remained totally shut in Friday after having 511 MMcf/d nominated for the Aug. 26 gas day.
A Northeast marketer said milder weather forecasts were definitely behind Friday's softening, which he thought was overdue. Even with price drops in the market area being bigger than those in the Gulf Coast, basis spreads between the two areas remained strong, he said.
In something of a market afterthought, Ophelia became a tropical storm for the fifth time in its existence Thursday evening. Without ever truly making landfall, the storm and most of its heaviest rains and strongest winds remained off the North Carolina coast Friday. It was beginning a turn toward the north-northeast that likely would keep it at sea, although it conceivably might bring some rain to the Northeast and Canada's Maritimes provinces before fizzling out.
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