The cash market was mixed Tuesday because of slightly weaker futures prices (October down 3.4 cents to $11.657) and continuing uncertainty over the status of Gulf production and the extent of the damage to Gulf infrastructure. Daily cash price changes were anywhere from down nearly $2 in the case of Florida Gas Transmission’s Zone 2 and 3 to up about 30 cents at a couple of Gulf Coast points.

In its first damage report, the Minerals Management Service (MMS) said that 37 shallow-water platforms, producing about 1% of total Gulf production, were destroyed by Katrina and four large deepwater platforms, accounting for about 10% of the pre-storm federal offshore Gulf oil production, were severely damaged and could take three to six months to repair. Shell’s Mars platform (150 MMcf/d of gas and 150,000 bbl/d of oil production) was among them (see related story).

MMS also reported damage to some offshore pipelines but failed to provide details. Tennessee Gas said it found leaks on several parts of its pipeline system and found its Port Sulphur compressor station under water. It warned producers to remain shut in until repairs can be made (see related story and Transportation Notes). About 700 MMcf/d of gas production remains shut in upstream of Tennessee. About 550 MMcf/d remains shut in upstream of Southern Natural, which has a force majeure in place until a complete damage assessment can be done.

Enbridge also reported damage to the Mississippi Canyon pipeline, which has not transported gas since Aug. 27. Meanwhile, multiple gas processing plants are out of service, many of them still under water and mud awaiting repairs (see related story). Enbridge, Enterprise Products Partners, Dynegy and ExxonMobil have reported damage to a total of seven gas processing plants with more than 5 Bcf/d of processing capacity, but there almost certainly are other processing facilities without power or under water.

Despite the infrastructure problems, producers appear to have made solid progress restoring offshore supply over the long holiday weekend. MMS said they returned 3.09 Bcf/d of gas production and 457,579 bbl/d of crude oil production to service by Tuesday morning compared to production on Friday.

Based on reports from 62 companies, the MMS said producers remanned 136 platforms and 26 rigs over the three-day weekend, but a total of 192 platforms and 27 rigs remained evacuated. A total of 870,374 bbl/d of oil production, or about 58% of the Gulf total, and 4,160.29 MMcf/d of gas production, 42% of the Gulf total, was still shut in Tuesday. Cumulative shut ins totaled 12,752,039 bbl of oil (2.3% of annual Gulf production) and 67.63 Bcf of gas (1.9% of annual Gulf gas production).

“I think the market is going to remain choppy until we see the full extent of the damage to platforms, processing and pipelines and see what the EIA storage report has to say this week,” said a Midwest marketer. “I’m bearish on Chicago gas, but the Nymex itself is still up in the air. Whoever has the best production and infrastructure information probably will have the best chance of guessing that one right.”

He noted that “a lot of Gulf gas came up over the weekend and I think a lot was parked on the pipelines, and they ended up having to sell it out today, which weakened prices. I’m curious to see if that holds tomorrow or whether prices will bounce back up again. My area, Chicago, was about as weak as it has been, about $1 behind the Nymex. It’s been there since the market exploded up $2; Chicago was just never able to go.”

Chicago traded in the high $10.60s Tuesday, about 98 cents behind the screen and 90 cents less than Henry Hub cash. “The best prices seem like they are early, but as soon as the storage buyers are done there is no more market available and you really have to find a home for your gas. As long as the Nymex stays up here I can’t imagine that it will get any better. I think we will still be $1 back and the weekend will be even worse. If Nymex was to come off significantly, I think Midwest basis would come in and buyers might come back into the market.”

Western market locations were all up about 10-20 cents Tuesday but were still well below eastern markets. “There continues to be a big East-West spread,” said a Canadian producer. “Everything in the West — Rockies, AECO, Midcontinent — is terrible. If you can find any piece of transport that gets you East, you are using it.”

A lot of the pressure clearly has been on Chicago. “You just can’t get any farther east from there right now,” the producer noted. “It’s a major constraint point. Vector is full out and that hasn’t been a great spread because Dawn has been fairly weak as well. The storage locations haven’t been able to keep up. Dawn today was 60-70 cents behind the Nymex.

“If you can get down to Henry that has been good. There is some gas flowing to the Gulf by displacement on ANR. The one pipe that is flowing backwards is Midwestern, which has bidirectional capabilities. It typically doesn’t flow southeast but that’s what it is doing now; it’s going from Chicago down to Texas Gas and Tennessee’s 500 leg. Midwestern is only about 7 cents in demand charges with a little fuel.”

However, markets in the Southeast appeared to vanish over the weekend and may remain that way through the rest of the week. Temperatures are mild across the United States and little change is seen on the horizon. “We didn’t see very much demand out there today,” said a Gulf Coast marketer. “Highs will be in the high 70s, low 80s in parts of the Northeast and that’s a big part of it. Plus we have a lot of gas coming back on now.

“Transco had a lot of excess gas on its system from the weekend so they were holding people to takes and telling them to burn off the extra gas. That was kind of surprising, but they are getting a lot of gas back on in the Gulf and there still was quite a bit of gas coming in from Texas to make up the shortfall.” Other pipelines, including Tennessee in Zone 0, also issued high linepack warnings.

Meanwhile, demand is likely to drop in the Southeast due to rains from Tropical Depression 16. The National Hurricane Center (NHC) put the center of the depression near Grand Bahama Island Tuesday morning about 180 miles southeast of Cape Canaveral, FL. The depression was expected to become a tropical storm Tuesday night and move north-northwest toward Florida’s east coast, bringing 5-15 inches of rain and high winds.

Some other forecasters say there is a slim chance that the storm could enter the eastern Gulf of Mexico next week. The NHC’s forecast route has the storm heading into southern Georgia by next Sunday. However, a lot can change in five days time.

The NHC said Hurricane Maria and Tropical Storm Nate remain no threat to the U.S. Coast and should maintain their northeastern courses out to the north Atlantic.

“Demand may be falling off quite a bit, but there also may be six hurricanes left in the system for the rest of the season and that has to be playing in peoples’ minds,” the Gulf Coast marketer said.

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