There didn’t seem to be enough weather-based demand — for either heating or cooling — to justify it, but prices were up fairly strongly across the board Monday. The cash market did derive minor support from the previous Friday’s 5.2-cent uptick by June futures and the restoration of industrial load from its usual weekend decline.
Increases ranged from about a nickel to a little more than a quarter. Tennessee’s Zone 6 in New England recorded the top gain despite its biggest urban market there, Boston, being forecast to get no colder than the mid 50s Tuesday.
Tuesday’s cash deals will continue to have positive screen guidance after the prompt-month contract rose another 7.2 cents Monday (see related story).
One source thought that although only relatively little gas production has been shut in so far because of flooding in South Louisiana (see related story), the potential temporary loss of a little more than 250 MMcf/d may be weighing more heavily on traders’ minds now than it did late last week.
As of Monday the Louisiana Department of Natural Resources was aware of a total of 122 wells representing production of 23.34 MMcf/d of gas and 3,318 b/d of oil being shut in as a result of Atchafalaya River Basin flooding in the state’s south central section, said Office of Conservation spokeswoman Anna Dearmon. The department has counted 2,264 wells in the Atchafalaya Basin that are in the potential inundation area provided by the Army Corps of Engineers, she said, adding, “The estimated production attributed to this area is 252.6 MMcf/d of gas and 19,278 b/d of oil and condensate.”
CNN.com reported that as of midday Monday 11 of the Morganza Spillway’s 125 gates had been opened, and quoted an Army Corps of Engineers spokesman as saying it was the first time in nearly 40 years that any of the gates had been opened.
Besides the ongoing force majeure that caused the isolation of a section of Tennessee’s 500 Line late last week (see Daily GPI, May 13), the possibility of more flooding-related pipeline constraints is mounting. Transco said Monday afternoon it is expecting water levels to begin to rise during the next several days around its Station 62 near Bayou Black on the Southeast Louisiana Lateral (SELA). “If water enters the facility or evacuation of personnel is mandated, all flow from offshore locations into the facility will be required to shut in,” said a bulletin board notice from Rich Truxell, Transco manager of gas control, who added that a SELA shutdown could impact about 200 MMcf/d of currently flowing production.
And Trunkline reported being notified by Plains All American Pipeline Co. that Plains’ Bayou Black tank facility may be required to shut in later this week due to anticipated high floodwaters. As a result, Plains’ Atchafalaya Pipeline, the condensate takeaway pipeline from Trunkline Field Services’ Patterson Liquid Handling Facility, may also be taken out of service. Trunkline said it is monitoring the condensate takeaway situation.
Being in Vermilion Parish in southwest Louisiana, far to the west of the flooding area, Nymex’s physical delivery point of Henry Hub was not expected to see any problems.
Quotes into Tennessee’s 500 Line were up nearly 15 cents, IntercontinentalExchange (ICE) said, and despite the section outage ICE-traded volumes jumped from 226,600 MMBtu Friday to 383,000 MMBtu Monday.
Parts of Texas through the desert Southwest were about the only areas where highs were still due to reach the 80s Tuesday, while much of the South east of the swollen Mississippi River was unlikely to see temperatures getting above 70. Some gas furnaces may be getting turned on with lows in a few regions predicted to reach the mid 40s, but that wasn’t considered cold enough to be responsible for any substantial increase in heating load.
“I have no idea,” a Midcontinent producer replied when asked about Monday’s all-points price strength. He said he couldn’t see freezing weather anywhere, and he considered last Friday’s futures rise of about a nickel too small to have had a significant impact on the cash market.
“The only thing I can think of is a lot of people must be buying for storage injections,” and that means next week’s storage report should feature a very large build that would be bearish in comparison with historical levels of injection, the producer said.
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