Prices plunged across the board Friday, with nearly all points recording their losses in three digits. Some Gulf Coast and Midcontinent production area points were seeing low-end quotes slip below $6, and Northwest-South of Green River traded as low as $4.95.
Bearish influences overwhelmed the market: mild weather virtually everywhere, actual or potential pipeline OFOs, comfortable storage levels, growing recovery from offshore shut-ins and the usual drop in industrial demand associated with weekends. Even futures was turning negative again, following Thursday's 8.5-cent uptick with a decline of 27.4 cents Friday.
Intra-Alberta quotes fell "only" a little more than C80 cents, making it the only market that didn't dive a dollar or more. Otherwise drops ranged from a dollar to about $2.20. Intra-Alberta was also the only pricing point to end the week less than $4 below first-of-month indexes (intra-Alberta was nearly C$3.90 below index).
High-linepack OFOs by SoCalGas and PG&E and in Tennessee's upstream Zone 0 were accompanied by Southern Natural Gas warning that it might need to issue one Sunday (see Transportation Notes). Some other pipes cautioned that receipts might exceed deliveries over the weekend and asked customers to avoid threatening system integrity by staying in balance.
Prospects for a weather-based rally are essentially zilch this week. In its latest six-to-10-day forecast released Friday, the National Weather Service predicted that above normal temperatures will extend beyond the coming weekend everywhere east of the Rockies and in California and Nevada. It continued to have no below normal temperatures in its outlook.
"I don't know when this thing [cash market slide] is going to stop," said a Gulf Coast producer. With the way futures has been falling most of the time lately, she asked rhetorically, "don't you think at some point somebody would see it as a great buying opportunity?" The traditional storage withdrawal season has begun, but the producer said she expects a "huge" injection to be reported for last week because the weather has been so moderate. "And we've got the four-day Thanksgiving holiday weekend coming up," so that should be another very weak period for prices, she added.
Despite it meaning less revenue for her company, the producer conceded that some market consolidation was probably needed. And despite Friday's tremendous softness, she reported not having any problems with gas getting turned back like it had been early last week.
A Dallas-area source said the weather was "beautiful" Friday, and if it got any warmer she might have to turn her air conditioner back on.
According to a Northeast marketer, the lack of weather-based load should keep the market soft for at least another 10 days.
"I feel vindicated," said Peter Bryant of TBC ConFuels in Houston. Back when Gulf Coast gas was trading at $12-14 or so, he explained, many people told him he was crazy to predict that it would drop back below $8 this year. "Things are not as bullish as people had thought." One benefit of prices coming back down so much is that it should ease credit problems for some traders, he pointed out.
There's just not that many places to take gas right now, Bryant noted. There's almost no heating or cooling load, and a lot of storage facilities are close to full. Asked when his "crystal ball" says prices will rally again," Bryant laughed and replied, "When it gets cold." But it looks like that's at least another week or more out in the future, he added. He observed that some traders are "still trying to talk prices back up." In the current market climate, he doesn't think talk can do anything about it, but said maybe those traders figure they can at least stop prices from dropping much more.
Recovery from hurricane-related shut-ins in the Gulf of Mexico slowed a bit. After recording a gain of 316.36 MMcf/d Thursday, production advanced only another 158.12 MMcf/d Friday, leaving 4,568.72 MMcf/d still offline, Minerals Management Service (MMS) said. That was down 935.67 MMcf/d from the previous Friday's tally. MMS counted 206 platforms and five mobile drilling rigs as remaining evacuated. Cumulative deferred production since Aug. 26 has climbed to 400.736 Bcf, which is just shy of 11% of the Gulf's approximate annual output of 3.65 Tcf.
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