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Tropical Storm Disrupts Gulf, But Price Impact Minor

Tropical Storm Disrupts Gulf, But Price Impact Minor

Tropical Storm Frances stuck around last week in the Gulf of Mexico longer than Hurricane Earl had the week before, but her market impact was just as fleeting. At first some people didn't accord Frances much importance at all, as prices softened slightly Wednesday even while Frances was strengthening to named tropical storm status. A Houston marketer practically sneered in dismissing it as a "rain storm" that would be short-lived. Price impact would be light because "there is not that much production down that far" off the southern tip of Texas, where Frances staked out a position and stayed there for almost three days.

However, such doubters were being won over Thursday as it became obvious Frances was causing significant production shut-ins along the Texas and Louisiana coasts. It was the disorganized nature of the storm that spread its influence as far east as New Orleans, which experienced significant flooding. Cash numbers were rising around a dime or more at many points as a dime-plus Nymex screen run-up helped pull up prices in areas not affected by the storm outages. However, those increases fell far shy of the ones of a quarter or more generated by Earl on Sept. 1.

But just as Earl's spikes fell by the wayside after just one day of firming, so did those of Frances. Although NGI was able to come up with a seriously understated production outage figure of more than 2.6 Bcf/d as of Friday morning, new prices in eastern markets were flat to down a nickel or so. (The outage figure was incomplete because volumes for several pipes were either unavailable or the pipeline representatives in downtown Houston were unable to get to work due to heavy street flooding.) "Everyone was dispatching [nominating] for the weekend as if production would be back up over the weekend," a Gulf Coast marketer said. However, he predicted many would be coming back today facing big imbalances.

Roger Tanner, Houston

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