Both cash and futures markets continued to grind lower with the physical market retreating anywhere from 4 to 8 cents with an average overall loss of 6 cents. Eastern, Gulf and Midwest points all took losses.
Futures traders have dismissed any market impact from Hurricane Isaac and suggest the expiring September contract will see another drop Wednesday. September fell 3.9 cents to $2.614 and October lost 4.0 cents to $2.633. October crude oil added 86 cents to $96.33/bbl.
Next-day gas at eastern points tumbled as weather forecasts called for pleasant, mild conditions. "Wednesday will be dry regionwide, except for a few showers in Virginia," said Mark Ressler, meteorologist for Weather.com. He added that high pressure would be in control with comfortably low humidity [and] temperatures as much as 4 degrees on either side of average. "Highs will peak in the 70s and 80s [and] Thursday will be dry but warmer with maybe a stray shower or thunderstorm in northern Maine."
As bidweek gets under way, marketers are not seeing a lot of activity, and even though prices continue to trend lower, there doesn't seem to be any groundswell or consensus to not lock in September index. "I think people are going to want to be pretty flat the market," said an eastern marketer. "You don't want to be caught [short] during the hurricane season. Prices are pretty low anyway, so what is the risk-reward. It's just not there."
In spite of the market's non-response to Hurricane Isaac, "the ninth of September is actually the eye of the hurricane season, so there is still some time," he cautioned. If you have to baseload, why wouldn't you just buy. Nymex is about $2.60; you have a 30-cent [eastern] basis, so you are looking at about $3 gas. If a hurricane hit hard, Nymex might go as high as $4, but why chance it?"
The market seems to be falling right into buyers' laps. Quotes on Algonquin Citygate slumped 5 cents to average $2.98, and Iroquois Waddington skidded 3 cents to $3.08. Tennessee Zone 6 200 L dropped 7 cents to $2.94.
Farther south other prominent eastern delivery points fell as well. Tetco M-3 was off 7 cents to average $2.85, and Transco Zone 6 New York slumped 7 cents as well to $2.85. Deliveries on Dominion fell 5 cents to $2.66.
Gulf Coast points couldn't buy a favorable move. Columbia Gulf Mainline fell 7 cents to average $2.64, and ANR SE was off 4 cents to $2.66. Henry Hub was down 9 cents to $2.72, and Tennessee 500 L shed 6 cents to an average $2.67. Transco Zone 3 fell 7 cents to $2.70, and Trunkline E LA dropped 2 cents to an average $2.72.
Next-day gas in the Midwest slumped as well, and forecasters hypothesized that remnants of Isaac might work their way as far north as Chicago. "Will Isaac bring desperately needed rain to sections of the Midwest passed over by recent rains toward the weekend?" queried Tom Skilling of the Chicago Weather Center on Facebook. "Might the Chicago area get in on some of its moisture? It seems so at the moment, though model solutions on how much and the extent of rain coverage remains predictably varied. Our forecast models struggle in forecasting the latter stages of system as complex as tropical cyclones."
Quotes for gas at the Chicago Citygate fell 8 cents to average $2.78, and gas on Michcon slumped 8 cents to $2.82. Deliveries on Consumers fell 7 cents to $2.82 also.
Futures traders are looking for ongoing weakness. "The storm is not much of a factor, and I think we will come in a little bit lower [Wednesday]," said a New York floor trader. "I am looking for $2.53 to $2.54."
Despite all the attention being paid to reduced supply from the Gulf of Mexico due to Tropical Storm Isaac, analysts are looking for lower prices. "On a trading basis, we are looking for the market to work lower over the next four to six weeks. We will hold current positions," said Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm.
DeVooght currently counsels end-users and trading accounts to stand aside, but producers and those with exposure to lower prices are advised to hold short a futures position for the balance of the summer established at $3.00-3.20 as well as a winter strip sold at $3.75-3.95. "Continue to sell any winter months above $3.75-3.95 for a light position as well as hold the remainder of a stack of October puts designed to cover the summer strip initiated at 25-27 cents," he said in a weekend report to clients.
In its 4 p.m. CDT report the National Hurricane Center (NHC) said now Hurricane Isaac was "getting better organized" as it prepared to make landfall on the Louisiana coast (see related story).
Isaac's anticipated landfall as a hurricane, according to AccuWeather.com, will bring the risk of storm surge flooding, inland flooding, damaging wind, tornadoes and beach erosion to part of the central Gulf Coast area.
"The angle at which Isaac could come ashore could still drive a substantial amount of water inland quickly over southeastern Louisiana and southern Mississippi," said AccuWeather.com hurricane expert Dan Kottlowski.
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