Cash Rides Strong Coattails of Energy Futures, New Storm

Weather-related demand remains somewhat meager, but the cash market found more than enough support Monday from supercharged energy futures contracts and Atlantic storm activity to realize gains of about a dime or greater at nearly every point.

Besides a strong gas screen, an October crude oil futures contract that soared above $35/bbl again gave an extra boost to the spot gas market. It was obvious that traders did not believe OPEC's weekend vow to inject another 800,000 bbl/d into the world's crude supply would be sufficient to alleviate energy shortfall problems looming for this winter, one source said. That market mood also generated a big increase in heating oil futures.

Gas futures appeared to be losing a bit of their oomph after cash trading closed for the morning, but then rallied again in the afternoon following the National Weather Service's declaration that a tropical depression about midway between Bermuda and the Carolinas had developed into Tropical Storm Florence, the Atlantic's sixth named storm of the year. Florence was less than 400 miles south-southeast of North Carolina's Cape Hatteras National Seashore and moving slowly west-southwest.

The storm has a lot of land mass to traverse in the Carolinas, Georgia and/or Florida before reaching the Gulf of Mexico, but such a feat is conceivable if it strengthens enough before going ashore, a trader said. Meanwhile, he quipped, "I think the market is going to go with the 'Flo'."

A marketer trading Texas Eastern M-3 in the high $5.20s lamented, "These $5-plus prices have just been insane." He was at a loss to understand why Northeast prices remain so high when the region has been unseasonably cool virtually all summer.

Sumas was about the only point registering an increase of less than a nickel Monday. It was receiving extra supplies from Pine River Plant, where Westcoast said a force majeure event that prevented the plant from reaching 75% capacity in the early stages of its annual turnaround had been resolved late Friday evening.

A western trader doesn't expect much market impact from El Paso shortening this week's storage facility outage by two days (see Transportation Notes), but said it could be a little bearish for San Juan Basin gas since the pipeline found it unnecessary to issue an OFO with the outage beginning today.

Storage demand played a significant role in sending Southern California border and PG&E citygate numbers up nearly 20 cents, a large marketer said. SoCal Gas storage stands at only 57 Bcf compared with 65 Bcf at this time last year, he said. Also playing into traders' strategy was the fact that swing prices began Monday's session at a discount to first-of-month levels, he noted, adding "Index has proved to be a pretty good resistance level for the first part of September." (Daily GPI readers can check out that market development with the graphing feature available in the features area at intelligencepress.com).

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