The trend of near-flat pricing earlier this week continued Thursday. Any remaining storage injection buying and the previous day's minuscule gain of 1.1 cent by November futures were largely offset by mild weather virtually everywhere outside parts of the desert Southwest and by the continuing lack of any tropical storm threat to Gulf of Mexico production.

Again it was a near-standoff between the amount of quotes that were flat to about a nickel higher and losses ranging from 2-3 cents to about 15 cents.

The Energy Information Administration's report of a 74 Bcf addition to storage in the week ending Sept. 24 exceeded consensus expectations of 69-70 Bcf. Nymex traders quickly showed a bearish response, sending November futures that had been slightly higher ahead of the report to a double-digit loss soon afterward that eventually wound up at a daily decline of 9 cents (see related story).

As the National Hurricane Center (NHC) indicated late Wednesday, Tropical Storm Nicole was already starting to dissipate over the Straits of Florida (see Daily GPI, Sept. 30), and it had disappeared from the NHC Atlantic monitoring map by Thursday morning. Apparently a pair of tropical waves that were being followed Wednesday afternoon had merged, as the agency said a "large area of disturbed weather associated with two tropical waves" was about 800 miles east of the Windward Islands. NHC gave the system 30% odds of becoming a tropical cyclone during the succeeding 48 hours.

Despite the fade by Nicole, its remnants were expected to drench much of the East Coast through the weekend and prevent any possibility of air conditioning load returning in the near term.

With temperatures in Southern California having receded to more seasonal levels after reaching record-setting heights earlier in the week, that left parts of the desert Southwest -- particularly around the Phoenix area -- as the last residue of major cooling demand. A slight warming trend in the South had stalled, with highs remaining limited to the low 80s through at least Friday. Otherwise the outlook for mild to chilly conditions was static.

Even with PG&E ending a high-inventory OFO (see Transportation Notes) citygate prices fell nearly a dime, according to IntercontinentalExchange (ICE), but volumes traded there on its online platform soared from 757,600 MMBtu Wednesday to 1,181,200 MMBtu Thursday.

On the other hand, ICE said, its Columbia Gas activity plunged from 776,500 MMBtu to 606,200 MMBtu as prices fell nearly a dime.

It was still pretty warm in his area, said a Southwest utility buyer, but highs should be shrinking into the 90s next week and very hot weather likely will have ended for the rest of 2010. For now his utility was sort of enjoying the best of both worlds: generation loads were still strong and gas prices are low. "Nobody's complaining around here," he said.

The struggle to bring gas storage into the Southwest is facing economics that are "not so good right now," the buyer said. That includes the factors of cheap conventional gas production and the increasing use of renewables and demand-side efficiencies limiting the need for extra gas supplies, he said.

Before answering another call, a Midcontinent producer summed up the near-term market succinctly: too much gas, no demand and storage nearly full. That's all the ingredients for continuation of a mostly softer market, he said.

Saying indexes in the Midcontinent look to be up about a quarter or so over September levels, a regional producer said initial positive index premiums for October "virtually disappeared" quickly due to the low-demand shoulder month. He is among those who feel that once storage is full (whenever that occurs), "then I think cash will take a tumble maybe below $3 here."

"I just don't see much hope in sight," the producer continued. "The winter forecast looks to be mild, the economy still weak for gas demand and continued new shale supplies are just exacerbating the problem." Saying he had heard that Devon Energy Corp. has plans to have 27 rigs running in western Oklahoma by the end of the year, he asked rhetorically, "Where's this gas going to go?"

The U.S. is coming off a very hot summer nationally, but it didn't help gas prices much, he said. "Can you imagine what it would have been like without the summer demand?" His company's processing margins are good at this point, but he thinks those could weaken into next year.

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