The industry was keeping its collective fingers crossed Friday as it watched the potentially destructive Hurricane Dennis eventually land in south-central Cuba on its way to the eastern Gulf of Mexico (GOM). The situation kept prices on the rise in most of the East. Except for a few flat to as much as 20 cents higher points, western markets tended to be weaker overall, with losses ranging up to about 30 cents.
With a few moderate losses in the mix, the East mostly ranged from flat to up about 45 cents. It was worth noting that several Gulf Coast points peaked at $8 or more, and Florida Gas Zone 3 averaged a little more than $8.50. The pipeline extended an Overage Alert Day notice for its market area into its fourth day Friday.
Although its winds diminished a bit upon hitting Cuban soil, Dennis was bidding to become only the fourth hurricane in recorded history to make U.S. landfall as a Category Five storm with winds of 155 mph or greater (see related story). For much of Friday it was packing maximum sustained winds of 150 mph, the National Hurricane Center (NHC) said.
One source said it was disturbing to hear comparisons of how similar the course of Dennis is to that of Hurricane Ivan last September. Ivan was the most damaging storm ever for offshore infrastructure, and some pipelines still have receipt points shut in as a result nearly a year later.
Producers in the eastern GOM were taking heed of the danger posed by Dennis by evacuating personnel from offshore platforms and drilling rigs and by shutting in production, although some such as Exxon Mobil, which has extensive operations in Mobile Bay near where the storm is expected to hit land, reported that as of Friday afternoon none of its output had been impacted.
It’s important to remember that although Dennis was knocking out a lot of supply, it also would be suppressing demand in much of the East through early this week by causing power outages and dumping large amounts of cooling rain as it moves northward after coming ashore.
In an event that has become commonplace in recent weeks, the two giant California distributors, PG&E and SoCalGas, dampened western weekend markets by issuing high-linepack OFOs for Saturday (see Transportation Notes). In addition, what The Weather Channel (TWC) called “a fairly strong July cold front” was due to move across the Pacific Northwest over the weekend. However, TWC added that a large upper-level high could build over the West this week and bring hot temperatures to the entire region except for the immediate West Coast.
The West’s only substantive price strength was in gains of 12-20 cents or so at El Paso-Permian and Waha. Heavy intrastate Texas and Midcontinent power generation demand due to high temperatures in the 90s was thought to be the primary source of their firmness.
It was “very ugly trading today” for a Northeast-based marketer. He believed that hefty increases in area citygates were due more to apprehension over supply cuts from the Gulf Coast more than any fundamental load. The remnants of Tropical Storm Cindy had reached New England and were creating temperatures 15-20 degrees below normal, which “sapped all demand” out of the Northeast, he said. In addition, “basis got destroyed,” he added. Near the end of Friday’s session he was seeing some citygates traded as little as 10 cents over Henry Hub, which killed any transportation opportunities.
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