Although several eastern points managed to keep rising Friday, a solid majority of the market was softer as the Houston area braced for what was expected to be a direct strike by Hurricane Ike. Offshore production outages rose by small amounts, but low demand based on generally moderate to cool weather negated the cumulative supply losses to some extent. The weekend decline of industrial load added to the overall bearish mood.

A couple of triple-digit losses (NGPL-South Texas and ANR-Southwest) were included in declines ranging from 2-3 cents to a little more than $1.05. All of the points that were flat to about 185 cents higher were either in the Northeast, Florida, or the Louisiana-Mississippi section of the Gulf Coast.

The Texas market continued to see especially big price drops because of the major demand destruction that would occur as Ike moved into the central section of the Lone Star State during the weekend. Load had already recorded a steep slide Friday along the upper Texas coast and in the Houston area due to evacuations and closings of businesses and schools.

Virtually all trading operations and pipeline offices in the Houston area were closed Friday, although many companies had employees working off-site.

Bentek Energy analyst Rocco Canonica said Bentek flow models showed 3.1 Bcf of Gulf of Mexico (GOM) production (including state waters) coming ashore Friday morning. That compares with 11.8 Bcf/d prior to Hurricane Gustav, he said. Further shut-ins conceivably could drop GOM output below the 2.9 Bcf/d nadir recorded during Gustav-related shut-ins, Canonica said.

GOM shut-in reports to Minerals Management Service (MMS) increased only slightly Friday. MMS said 83 companies had reported gas shut-ins totaling 6,985 MMcf/d by 11:30 a.m. CDT; that was only 79 MMcf/d more than on Thursday (MMS only reports production outages from federal waters, not state waters). Other statistics also revealed minor outage increases: oil shut-ins were up less than 7,000 b/d to 1,267,187 b/d; platform evacuations rose by 34 to 596; and mobile drilling rig evacuations rose by eight to 101.

At 4 p.m. CDT Friday the center of Ike was about 135 miles southeast of Galveston, TX and about 240 miles east of Corpus Christi, TX, the National Hurricane Center (NHC) said. The storm was moving west-northwest and northwest at near 12 mph. A northwest motion was expected to continue Friday with a turn north expected on Saturday. The storm was a Category Two, but the NHC said the storm could reach Category Three (winds of 111 mph or greater, according to the Saffir-Simpson Scale) before landfall late Friday night or early Saturday.

“This is going to be the worst storm we’ve seen in a couple years,” said Steve Smith, an atmospheric physicist for the Carvill specialty reinsurance brokerage firm based in Fort Lauderdale, FL. He expected Ike to cause at least $5 billion in insured damage. “Five billion is the absolute floor. If this thing intensifies, the figure could easily reach $10 billion to $15 billion,” Smith said.

Meanwhile, “We have a rather large hurricane bearing down on the Texas coast and I’m anxious to get back and deal with some of the business issues there,” Marvin Odum, president of Shell Oil Co., told lawmakers at an energy summit on Capitol Hill Friday. “I can assure you, though, that the infrastructure is as prepared as it can be. We have the thousands of industry people that work in that industry in safe locations…It [shut-in GOM supply] will be returned to production as absolutely quickly as possible.”

Monday’s cash market will have marginal screen support after October natural gas futures rose 11.8 cents Friday.

Although Ike’s rains will be keeping the western end of the South cool for a while, more normal temperatures were starting to return to the region’s eastern sections. Such locations as Atlanta, Birmingham, AL, and Charlotte, NC, could expect to see highs around 90 degrees Saturday.

The Northeast and Midwest forecasts called for modest warming trends to be under way going into the weekend, but except for the southernmost sections of the Midwest conditions will remain comfortably cool.

The West had some heat in the 90s going in the desert Southwest and interior California, but had moderate to cool forecasts everywhere else. The lack of weather-based demand had Rockies points dropping by 60 cents or more. El Paso was slightly oversupplied, saying its probability of declaring a Strained Operating Condition or Critical Operating Condition had been set to moderate Friday due to high linepack.

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