Cash prices were up sharply across the board Wednesday with increases of 20-35 cents in the Gulf Coast and Northeast, about a quarter on average in the Midcontinent and 15-20 cents in the West. But the futures market tanked 15.9 cents to $4.631 after peaking at $4.88 just prior to a bearish afternoon update on Hurricane Ivan by the National Hurricane Center.

The latest forecast track shows Ivan making a more northerly turn across the middle of Cuba and into the far eastern Gulf, barely impacting eastern Gulf production facilities before making landfall probably next Tuesday somewhere on the Florida panhandle.

With the likelihood of a 80-85 Bcf storage injection in this week’s EIA storage report, compared to the five-year average of about 80 Bcf, the futures market quickly turned south in the afternoon, setting the stage for probably more declines in the cash market on Thursday.

Few traders were able to adequately explain the cash increases on Wednesday. But despite the increases, cash prices remain 20-45 cents below bidweek indexes. Wednesday’s buying was mainly attributed to storage injection demand and some power generation load.

“Seems like a lot of the power generators in the Northeast are short,” said a New England marketer. “We obviously have very benign weather. A lot of rain is moving in from the remnants of Hurricane Frances. Power prices are quite soft. We have relatively decent demand, though, for spot natural gas. Seems like a lot of the Labor Day weekend packages caught the power gen crowd short. We’re seeing regional basis between 40 and 60 cents. Dracut, Algonquin and Tennessee all were trading up quite a bit.”

Nepool power prices rose slightly in daily trading on Intercontinental Exchange. PJM prices also were on the rise and PJM West added about $2 to $46.89.

“New York basis is about 50 cents compared to 37 cents during bidweek,” said a marketer. “The spreads have been strange all month so far. There are healthy volumes exchanging hands at many of these points, so there’s some solid demand. Storage injection could be part of it, but it’s getting full.”

In the West, spot prices were still responding to record power demand of 45,165 MW reported by the California Independent System Operator on Tuesday. Demand was expected to reach another record of 45,542 MW on Wednesday. But with conservation measures, maintenance restrictions and absence of the wildfire and related problems at the Geysers geothermal plant, the grid operator was not expecting any problems. As a result, western power prices fell $2-3/MWh. NP-15 in California dropped $2.92 on ICE to $54.51. And Palo Verde was off $4.12 to $43.61.

Most market forecasts put the weekly storage injection at about 80-85 Bcf. Kyle Cooper of Salomon Smith Barney said he’s expecting an injection between 77 and 87 Bcf. Tim Evans, a futures analyst at IFR Pegasus, is expecting a 95-105 Bcf injection, given the trend of much higher than average injections over the past four weeks. During the same week last year (week ending Sept. 5) 99 Bcf was injected into storage. Over the last five years, about 80 Bcf was injected into storage.

“Yearly comparisons may be construed as supportive in the coming weeks,” noted Cooper in his gas market commentary. “Last year witnessed injections near 100 Bcf over four consecutive weeks in September. Injections this year are unlikely to match that rate. However, injections are likely to exceed 80 Bcf for the next four weeks, and that would place inventories over 3 Tcf before October. That’s not exactly bullish.”

Without the danger of Ivan disrupting production for more than a day, the market is likely to resume the downtrend that has held it since June.

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