EIA’s report of a 93 Bcf weekly gas storage injection was in line with expectations, but futures traders apparently looked ahead to next week’s storage report which could feature a much lower number because of the Gulf production shut ins this week. Futures went off the board at $5.050, and eastern cash prices fell only about 3-8 cents on average. Western cash, however, once again showed strength, posting mainly nickel gains.

The Minerals Management Services (MMS) said that 707 MMcf/d of gas production and 19,031 bbl/d of oil remained shut in on Thursday from the hurricane evacuations earlier in the week. A total of 34 platforms remained evacuated. Most Gulf pipelines were back to normal but a few stragglers were to return to normal flows by Friday.

Several observers speculated that the supply losses from the hurricane were enough to put a floor under the market at the key $5 level. “That’s what we were thinking. I think people already are looking toward next week’s storage number which could be around a 75-85 Bcf injection, maybe lower. Storage levels still are pretty low compared to the five-year average and until that changes, I’m going to remain a bull. I was considering changing that earlier this week when prices failed to spike in the face of a hurricane in the production area, but now that we’ve had a slight reversal here, I think I’m on the right side of the market.”

The Energy Information Administration reported that there was 1,866 Bcf of working gas in storage on July 11, which was 93 Bcf more than the previous week, 556 Bcf less than the same time last year, and exactly 300 Bcf less than the five-year average. In the East, working gas levels are 171 Bcf, or 14%, below the five-year average. The Producing region is 129 Bcf, or 20%, below the five-year average. But the West is only 1 Bcf below the five year average.

Nevertheless, cash prices were strongest in the West on Thursday in response to continuing heat and strong power generation and agricultural demand. “Cash has been trading over the forward market for a while in the West, which is interesting,” said a marketer. “But we saw basis tighten in here for next month to kind of bring those closer in sync. At points this morning we saw next month at Sumas within a few cents of current cash. All the pipes look to be in pretty good shape in terms of packs and drafts, so I don’t see anything dictating a big push down in prices. I think it will track whatever the Merc will do at the open and that probably will be higher.

“PG&E has a low inventory but within their acceptable tolerance. There’s no shortage of buyers out here though, especially at Opal, which has been strong. I would have thought that incremental generation units that could burn gas were already on. But it seems like loads are increasing.”

In the desert Southwest, loads remained extremely high Thursday, but down slightly from a peak earlier in the week. Temperatures in Phoenix reached 117 degrees on Tuesday but fell back to 110-112 Thursday for a high.

“We had another high volume day,” said a large Southwestern electric utility. “We bought San Juan between $4.62 and $4.68 probably averaging $4.64-65. Keystone was off about a nickel, but Blanco and Bondad were up about a nickel. Prices at Keystone were down around $4.94 being more tied to the Henry Hub and eastern points than the San Juan is.

“We’ve have big time loads this week. We hit a new peak demand record for power on Tuesday. The monsoons could come in, but it’s really a wash; degrees go down but the humidity goes up. It could come in any time. It was raining earlier in the week but the rain was evaporating before it hit the ground. I expect these significant loads to continue for the foreseeable future.”

He said he has seen 60% cuts on El Paso Natural Gas in the San Juan Basin this week because of the strong demand and because of low system storage levels. El Paso shippers have had to turn to Permian purchases to make up for their losses. However, the pipeline lifted its unauthorized overpull penalty late Wednesday.

In the Gulf Coast region, most of the pipelines were operating under normal conditions again. The force majeure on the High Island Offshore System was lifted for Thursday’s flow.

“We had some MOPS supply that was cut but it’s back up for tomorrow,” said a Florida utility buyer. “I think it will be completely back to normal Friday. But I also think prices will be a little bit higher in light of the late Nymex rebound.”

In the Midwest, cash at Chicago Citygate fell about a nickel and field prices remained relatively strong. “I think prices are a good buy right now because there are so many bullish bullets out there. Storage is still low. The next injection will be lower. Field prices are still coming in higher than citygate because of the production cuts in the Gulf. NGPL A-Leg was running at $5.04 and the citygate was at $4.98. Canadian gas is keeping Chicago down. But Northern Natural prices have been running pretty flat to gate. I doubt we see the normal weekend drop in prices.”

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