Cash prices overall dropped an average 6 cents Friday as traders were reluctant to make purchases before a long holiday weekend when many locations were forecast to see load-dampening effects of the remnants of Isaac. California points were firm, Eastern points slumped, and Gulf locations were steady to lower. At the close of futures trading October had risen 5.1 cents to $2.799 and November was up by 4.4 cents to $2.963. October crude oil jumped $1.85 to $96.47/bbl.
Prices for delivery over the weekend and through Tuesday at Southern California points firmed as traders cited the ongoing power deficit created by the outage of the San Onofre Nuclear Generating Plant.
"SoCal points have been strong this year, and I think it continues to be attributed to [SoCal] Edison SONGS [San Onofre Nuclear Generating Station] being out," said a southern California utility analyst.
"That seems to be the driving force. You've got a combination of hot weather causing sustained heat for a couple of weeks, then you have this additional gas load from SONGS being out, and every time the SoCal basis weakens, it builds right back up. It has gyrated from a few pennies in the negative to plus 15 as the screen trades every month.We've only had a few days of flat Henry to SoCal, but I expect the basis to fluctuate that way depending on the weather."
He added that he thought the challenge utilities had was that California has had a hot summer, but no brown outs. In addition, the SONGS plant has been out, so it becomes problematic when dealing with any utility requests for rate increases, or in a broader sense, any other requests of ratepayers.
Quotes at Malin slumped but West Coast points were strong. Weekend and Tuesday gas at the PG&E Citygate gained 7 cents to average $3.07, and deliveries to SoCal Citygate gained 2 cents to $3.02. At the SoCal Border quotes for the extended weekend rose 3 cents to $2.91, and El Paso S Mainline gained two cents to $3.01. Malin eased 8 cents to $2.63.
Forecasts called for rising temperatures at both Los Angeles and San Francisco. AccuWeather.com predicted Friday's high of 88 in Los Angeles would rise to 90 on Sunday and Monday before easing to 87 on Tuesday. The normal high in Los Angeles is 85 at this time of year. Temperatures were also forecast to rise in San Francisco. Friday's high of 63 was anticipated to jump to 75 on Sunday and 76 Monday before receding to 73 on Tuesday. The normal high in San Francisco this time of year is 74.
Eastern marketers reported that they thought prices at eastern points were normalizing. "We bought some intraday Marcellus gas Friday for $2.70 at Station 313. It's not in the main Marcellus pool, but Marcellus gas is going for the same price. It seems everything is flattening out. For now the days of 80-cent Marcellus gas are over," said a Texas-based eastern marketer.
He commented that Friday for Tuesday price weakness was a normal case of a long holiday weekend, the emerging shoulder season, and a lack of desire to purchase gas for a period when industrial activity was expected to be light.
Eastern prices sagged as Isaac-driven rain was expected to reach the East late in the holiday period. "[T]he probability of showers and thunderstorms will increase over the mid-Atlantic Sunday and Labor Day with temperatures trending downward. Much of the time in New England is likely to be rain-free as the second high-pressure area moves in," said AccuWeather.com meteorologist Alex Sosnowski.
Deliveries to Tetco M-3 for the extended period fell 14 cents to average $2.79, and gas into Transco Zone 6 New York slipped 13 cents to $2.79. Parcels on Dominion fell 8 cents to $2.62, and gas into Clarington skidded 9 cents to $2.67.
Gulf points for the most part were flat to lower. ANR SE deliveries tumbled 7 cents to $2.62, and gas at the Henry Hub was flat to average $2.72. Tennessee 500 L added 2 cents to $2.72, and Transco Zone 3 was off 4 cents to $2.69.
Futures traders attributed the day's gains to short covering before the long holiday weekend. "It was nothing major. The market will be looking next week to see what the impact of the Gulf shut-ins was, and maybe we trade up to $2.85 to $2.87," said a New York floor trader. "From there I look for the market to come back off. I'm thinking we trade up to $2.85 and then on the downside $2.50 to $2.55 in the October [contract]."
Although what is left of Isaac was pummeling the lower and middle Mississippi Valley with heavy rainfall and causing flood threats, the Atlantic Basin remained active.
In its 5 p.m. EDT Friday report the National Hurricane Center (NHC) was following Hurricane Kirk; it was packing winds of 90 mph in the open Atlantic, and Tropical Storm Leslie. Leslie was 710 miles east of the Leeward Islands and moving to the west-northwest at 18 mph. Winds were close to hurricane strength at 65 mph, and NHC said Leslie could become a hurricane over the weekend.
Analysts see the loss of 3 Bcf/d of Gulf of Mexico production as having been factored into the market and "as a result, the market may be forced to focus a bit further on the temperature variable that has supported values throughout the summer," said Jim Ritterbusch of Ritterbusch and Associates.
"Hurricanes are usually a double-edged sword as supply taken out of the market is usually partially offset by power outages and cooling affects that can extend well beyond the Gulf Coast region. Hurricane Isaac appears to be driving a broad swath of cool air up into the Midwest that could help maintain below-normal temps within the Midcontinent region for a couple of weeks. As a result, downsized injections that might flow off of the offshore production cuts will be tempered by other factors. At the end of the day, the market will still need to contend with a record supply that still appears headed toward a peak of about 4 Tcf by early November," he said in a morning note to clients.
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