Crude oil futures continued their recent record-setting ways Tuesday, jumping more than a dollar to $51.09/bbl — the first daily settlement ever above $51. And although some natural gas traders may have felt it was akin to comparing apples with oranges, gas in both its physical and Nymex forms tried to emulate petroleum’s strength as best it could.
Despite topping all other points with a high quote of $7.50, Florida Gas Zone 3 (along with Florida Gas Zone 1) recorded Tuesday’s smallest average gains of about a dime. Otherwise advances were much stronger, ranging from a little less than 30 cents to 75 cents.
But gas traders were at a loss to find fundamental justification for a second day of spiking prices that managed to erase Friday’s big losses. And this time the surging cash market was accompanied by a major advance on the natural gas screen that was just shy of 44 cents. Despite no sign of increasing physical demand, a couple of sources expected the futures support to be sufficient for further cash upticks Wednesday.
“Crude’s the story in today’s market,” said a producer who trades the Northeast. Cold fronts moving into the Northeast and Midwest failed to impress him loadwise. It’s not getting all that cold in the Northeast, he said, noting morning readings of about 50 degrees for southern parts of the region. Not only was it a fairly mild cold front, he said, but temperatures were due to start getting back up near 70 as early as Wednesday. He had heard about frost warnings in the Northeast, but said they must be occurring only in the more northerly mountainous areas.
But even with weather support due to get weaker again, the producer expected “the strength of the whole energy futures complex” to move cash quotes higher again Wednesday.
A marketer was thinking along similar lines in saying he couldn’t see anything to explain the continuing run-up in prices other than leaning on the crude oil juggernaut. Besides the usual list of global points that have traders worried about crude supply, it should be noted that the Gulf of Mexico shut-in situation has been worse for oil than it has for gas, he said. And the impact of the gas shut-ins is — or at least should be — largely negated by the high comfort levels of storage, he argued.
Offshore operators continued this week’s quickened rate of restoring shut-in Gulf of Mexico wells. Minerals Management Service said 22 companies reported having 1,735.76 MMcf/d still offline at midday Tuesday, nearly 242 MMcf/d less than on Monday. The count of evacuated platforms was falling even faster, having dropped from 39 Friday to 16 Monday and to nine Tuesday. The 14.11% level of shut-in Gulf of Mexico gas output compared with 26.65% (453,092 bbl/d) of normal oil production, MMS said.
BP said pipeline repairs would keep it from restoring full Gulf production — currently running at less than half of normal 350,000 boe/d levels, according to a spokeswoman — until the end of October. And Sonat is not missing the offshore supplies currently denied to it at all; in fact, the pipeline said it might have to issue an OFO to control an excess of receipts west of its Bienville Compressor Station in North Louisiana (see related story).
Houston traders could detect an unusual wee nip in the air Tuesday morning. But a marketer in the city said he didn’t really see any significant dip in Texas power generation demand, even with temperatures in the state forecast to go lower before the weekend. It was sort of a quiet market day for his company, he said, as people seemed content to sit back and continue riding the “up escalator” for prices.
Western points managed to keep up with the gains of the overall market despite light weather-related load and what would normally be a substantial price depressant — a high-inventory OFO by PG&E with zero tolerance for positive imbalances (see Transportation Notes).
In its forecast for the Oct. 11-15 business week, the National Weather Service looks for below normal temperatures in most of the West, specifically south and west of a line curving southeastward from central Washington state to central Texas. It also predicted below normal readings along a coastal strip of the Northeast. The agency expects above normal temperatures in a wide swath from the Upper Plains and Midwest through the Midcontinent to the Gulf Coast area from southeastern Louisiana to the western end of the Florida Panhandle.
Analysts weighed in with their expectations for the upcoming storage report: Thomas Driscoll of Lehman Brothers calls for an injection of 60 Bcf for the week ended Oct. 1, while Citigroup’s Kyle Cooper looks for a larger build between 65 and 75 Bcf.
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