Mild weather, weak demand and a 58 Bcf weekly storage injection, which was slightly on the high end of expectations, Thursday weighed heavily on cash prices, which on average fell 10-65 cents.

Big declines of 40-65 cents were seen in the cool, wet Northeast. Meanwhile, prices in the Gulf Coast tumbled 15-50 cents and points in the Midcontinent, Midwest and West slipped 10-25 cents.

The Energy Information Administration’s weekly gas storage report showed working gas levels at 2,987 Bcf on Oct. 7, or about 162 Bcf less than the same time last year and 34 Bcf more than the five-year average. About 41 Bcf of working gas was added in the East, 8 Bcf was added in the West and 9 Bcf was added in the Producing Region.

There are about four more weeks left in the traditional storage injection season — although in 2001 injections continued until the end of November for a total of eight additional weeks. Over the last five years an additional 185 Bcf of gas on average was added from the same week in October until net weekly withdrawals began. If a similar amount is added this year, working gas levels will enter the winter heating season at about 3,172 Bcf, or 34 Bcf above the five-year average but 155 Bcf less than last year.

Futures analyst Tim Evans said the 58 Bcf net injection in this week’s EIA report was bearish compared to market expectations and was surprising given the level of Gulf production still offline due to damage from the hurricanes. However, the injection fell short of the 67 Bcf injection during the same week last year and the 64 Bcf five-year average. “Once again this points to rising output from other regions and demand destruction, whether directly due to the storms or because of the price. This is just what happened following Hurricance Ivan last year.”

Several sources said the storage number had little significance in the cash market Thursday. Weak demand and mild weather are the two major factors influencing prices, other than the continuing Gulf shut-ins. “Even before the storage number, futures already were down to $13.23 but they came up after it was released,” noted a Midwest supplier. “The uncertainty over the supply situation is still holding the market hostage.”

The Minerals Management Service (MMS) said offshore Gulf production shut-ins Thursday fell 219 MMcf/d to 5,699.66 MMcf/d. MMS said 236 platforms and two rigs remain evacuated. Cumulative production shut-ins now total 283.226 Bcf, or 7.8% of annual offshore Gulf gas production.

“Cash was down about a dime to 15 cents from Wednesday in Chicago, but considering where Nymex is, basis is even worse at about minus $1.10,” the Midwest supplier said at noon Thursday. “The problem is there’s not much injection space left and there’s a lot of Canadian gas that needs a home. In fact in Chicago it would appear that there just isn’t any room left. Otherwise we wouldn’t be a dollar disconnected.”

He said price spreads are simply too good right now for there to be much storage space left available in the Midwest. “I’ve been trying my best to get all of my gas out of Chicago up Vector to Dawn, down Midwestern to Texas Gas, through ANR to the Southeast or anywhere else I can, but most of those pipelines are constrained so at the end of the day I’m having to sell it, park it or back it up into Alberta. Going back to Alberta is not a great option. AECO is minus $2.50 or something.

“It’s going to be even worse tomorrow,” he predicted. “We may lose more industrial demand and we just can’t afford to lose any more demand right now. I think the spreads will weaken again and you’ll see a big disconnect between Chicago and everywhere else.”

The Henry Hub gets a little bit weaker each day as volumes and liquidity return, but the hub continues to hold a sizeable premium to futures. Meanwhile Northeast basis remains weak. “There’s no demand out there,” said a marketer. “The Northeast just has a wet blanket thrown over it right now. We’re not seeing any real demand from power generation. Basis to the hub is like 60 cents. The hub is still trading 15-20 cents over the screen. There’s not much of anything going on. New England is very weak. We’ve seen some reports of some colder weather toward the end of the month but nobody is preparing for that today.”

With demand down and mild weather, Cove Point LNG volumes are off substantially. Volumes at Transco Pleasant Valley, which is where Cove Point gas enters the grid, have declined steadily.

“This market is trading on such an incredible amount of uncertainty right now,” noted a large retail buyer in the Northeast. “No one really knows what is going to happen. You would be hard pressed to find a time when the market was trading on more uncertainty. There are question marks over how much demand was lost and how much will come back, when supplies will come back to normal and how much will be shut in by December, and when the winter will show up and how cold it will be.”

He noted that at major market locations in the Gulf it is difficult to get a handle on forward prices because of a significant lack of liquidity. “Nobody is really showing a lot out there in the forward market right now. From just the screen you would say that you should sell October and buy November but it’s hard to tell what Station 65 is going to be relative to the hub when you get to November. Everyone is playing it pretty close to the vest and no one is sure what to do. It’s a very risky market situation.”

A compressor problem at the Alameda station on Alliance Pipeline, which forced the company to conduct emergency maintenance, reduced gas flows to Chicago Thursday. “That backed gas up into Alberta and made it difficult to move gas out of the province,” said a Canadian producer. “More gas was sold at Station 2 than normal. And prices started strong at Huntington/Sumas but then fell about 20-30 cents. Midwest storage is filling up and the weather is mild, so that is making deliveries there unattractive.”

In the West, prices returned to normal on Northwest Pipeline, which had cut flows through its mainline on Thursday to replace several segments of pipeline between the Rangely and Cisco compressor stations. Flows were restored for Friday’s gas day and prices at Northwest South of Green River jumped sharply.

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