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More Seasonal Temps Trump Karen Concerns; Futures Steady

Physical natural gas for weekend and Monday delivery overall fell a dime in Friday's trading. Only a handful of points made it into positive territory and many experienced double-digit declines.

Points along the predicted path of Tropical Storm Karen suffered smaller losses, and the greatest declines were felt by a couple of Marcellus Shale points.

At the close of trading, November futures had risen 0.7 cent to $3.506 and December was up 1.0 cent to $3.674. November crude oil gained 53 cents to $103.84/bbl.

Weekend and Monday prices at Midwest locations tumbled as forecasts called for a return to normal if not below-normal temperatures. Forecaster Wunderground.com predicted that the high in Minneapolis Friday of 77 would ease to 59 Saturday before rising back to 64 on Monday. The normal high in Minneapolis is 64. Chicago's expected high Friday of 84 was anticipated to slide to 79 Saturday and fall to 64 on Monday. The typical early October high in Chicago is 68. Indianapolis' maximum on Friday of 86 was predicted to drop to 84 Saturday before easing further to 63 on Monday. The seasonal norm for Indianapolis is 70.

A Midwest utility buyer looking at forecasts of cooler temperatures over the weekend thought there would not be any need to make weekend purchases. "We always go into October a little long for the first half of the month because winter hasn't kicked in during the first half, and we baseload what we will be needing at the end of the month. We have a lot of gas available so we don't have to purchase any for the weekend," he said.

"We should be burning 60,000 Dth/d depending if people turn their furnaces on, but I think anywhere from 60,000 to 70,000 Dth/d is likely since it is supposed to get down to 29 [wind chill] at night. That should be a pretty good load for an October weekend."

Gas for weekend and Monday delivery on Alliance fell 12 cents to $3.58, and gas at the Chicago Citygates skidded a dime to $3.56. Deliveries on Northern Natural Ventura tumbled 17 cents to $3.51, and at Demarcation weekend and Monday packages dropped 16 cents to $3.49.

Gulf Coast locations on the projected path of Tropical Storm Karen dropped a couple of pennies. On ANR SE, gas changed hands for weekend and Monday delivery at $3.46, down 3 cents, and at the Henry Hub gas came in at $3.56, down 2 cents. On Columbia Gulf Mainline, gas was seen at $3.49, down a nickel, and on Tennessee 500 L parcels changed hands at $3.52, down 3 cents. Exchanges on Florida Gas Transmission Zone 3 were seen at $3.63, down a penny.

Marcellus points dropped more than $1. Gas at Transco-Leidy fell $1.04 to $1.52, and deliveries to Tennessee Zone 4 Marcellus shed 31 cents to $1.47.

In its 5 p.m. EDT Friday report the National Hurricane Center (NHC) said Tropical Storm Karen was 235 miles south of the mouth of the Mississippi River and was moving to the north-northwest at 7 mph. Karen had dropped to 50 mph winds and NHC said there could be some strengthening Saturday night and Sunday. Storm watches and warnings were narrowed and included Morgan City, LA, to the Florida Panhandle (see related story).

Forecasters see little chance that Karen will make it to hurricane status. "The continued impacts of the wind shear, as well as dry air residing to the west of the storm, should prevent Karen from intensifying into a hurricane during its lifetime and lead to only tropical storm-force winds striking the eastern portions of the Gulf production area, but some guidance does suggest there is risk that some minor re-intensification could occur when Karen curves to the Northeast right as it makes landfall," said forecaster MDA Weather Services in a Friday morning note to clients. "A mostly northward and eventually northeastward path remains favored with Tropical Storm Karen over the next couple of days, although the track has shifted a little westward since [Thursday] and now favors a later landfall near Mobile on Sunday morning."

Tropical Storm Karen was lending some bullish support to the market, but analysts note that its intensity is not likely to cause major disruptions, and they continue with a bearish outlook.

The Department of Interior's Bureau of Safety and Environmental Enforcement (BSEE) on Friday said 41 operators had submitted status reports on their Gulf of Mexico (GOM) facilities. There was 1,497 MMcf/d of natural gas that had been shut in, or 39.38% of GOM output. Also shut in were 693,345 b/d of oil, which amounts to almost half (49.52%) of the offshore's total output.

Close to one-third of the GOM's platforms -- 185 -- had been evacuated as of Friday, along with 18 (37.5%) of the drilling rigs, according to the BSEE. Four dynamically positioned rigs also had been moved off location, which is about 12.5% of the total number.

"[W]e would note that this storm is not expected to be powerful enough to significantly disrupt GOM production," said Jim Ritterbusch of Ritterbusch and Associates. "We also feel that any lost output in the GOM could easily be negated by an uplift in imports at about the same time that onshore production is beginning to show recovery.

"Most pricing models attempt to factor in a given loss of production every year, and it appears that this season's curtailments will prove significantly smaller than widely anticipated a couple of months ago," he added. "Otherwise, we see most fundamental and technical indicators still pointed in a southerly direction. Temperature outlooks that now extend well into the third week of October are still indicating above-normal temps along the heavily populated Eastern Seaboard conducive to limited demand for either heating or cooling purposes. And while production has dipped of late, and year over year gains are downsized appreciably from 2012, we still see trends as ripe for a record output pace across most of this fourth quarter." 

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