Even as already modest weather-based demand continued to diminish or see only slight increases, prices again registered fairly strong gains at all points Wednesday in an extension of this week’s post-holiday rally. It wasn’t much, but the previous day’s futures increase of 7.9 cents gave some backing to the cash market, and the fact that prices were still fairly low compared to previous months may have attracted buyers who still had options on where to place the supplies.

Price advances were remarkably consistent across most geographic areas. Although they ranged from a little more than C10 cents to a little more than 35 cents, a large majority were in the 20s.

Prior-day futures support will continue for cash numbers Thursday, but it declined again as the October contract was able to eke out a final increase of only 2.2 cents after being more than 15 cents higher earlier in the day (see related story).

The extension of an Overage Alert Day with tighter imbalance tolerance by Florida Gas Transmission (see Transportation Notes) propelled the Florida citygate to Wednesday’s largest uptick. And the PG&E citygate retained its position at the top of the price hill with an advance of about a quarter after the utility issued a low-inventory OFO.

Tropical Storm Fred became the second major hurricane of the year, the National Hurricane Center (NHC) said, but was still far from North America in the eastern Atlantic and remained no threat to any land masses, much less Gulf of Mexico production. NHC said it was no longer tracking a low-pressure area, which had been bringing rain to the Mid-Atlantic coast Tuesday.

Despite the seeming dissipation of the low-pressure area, the National Weather Channel’s (TWC) website Wednesday afternoon carried this headline: “Forget Fred, East Coast storm packs a punch.” A combination of high winds and heavy rains would be attacking the Northeast through Thursday, TWC said, which would take temperatures from the Appalachians eastward up to 20 degrees below average. That may have accounted for a bit of heating load that helped boost prices Wednesday. Thursday highs will only reach into the 60s from Boston to Washington, DC, while portions of the Poconos and Catskills mountain areas may only top out in the 50s, the forecasting service said.

The Rockies and Pacific Northwest constituted the only regions with warming trends of any significance, and even then peak temperatures in those areas Thursday would be limited to the low 80s. Readings were also due to rise in interior California and desert Southwest, but only modestly to the upper 90s.and low 100s, which is about par for the late-summer course in those areas.

Otherwise, heat levels were forecast to decline slightly in the South, Northeast and Midwest.

And the rapid storage refill beat goes on. Southern Natural Gas said that as of last Thursday (Sept. 3), inventories at its two storage facilities in Louisiana and Mississippi were up to 58.4 Bcf, or 97% of total working gas capacity of 60.0 Bcf. That compares with 47.7 Bcf (79%) on Sept. 4, 2008 and 51.2 Bcf (85%) on Sept. 6, 2007, Southern said.

There wasn’t much weather demand to begin with, and the trends are just getting weaker, said a Midcontinent producer, so it puzzled him about how cash gains could stay so strong Wednesday. However, he suspected there was still some bargain-hunting going on, because even with Tuesday’s and Wednesday’s price strength, “gas is still very cheap compared to oil.”

He noted that he could have bought Oklahoma gas for $1.60-1.70 last Friday and then resold it for about a dollar higher Wednesday. Of course, he noted, you’d have had to be able to put the gas somewhere in the meantime. If a trader is unable to stash it aboard the pipelines because of imbalance restrictions, sometimes it’s possible to “borrow” storage space from capacity holders who don’t plan to use it for short periods, he said.

However, most of the Midcontinent pipes have little available storage capacity left, the producer continued. He sees cash softness coming up Thursday because of the lack of weather load and futures giving back much of their advance late in the day. But much more severe price drops are likely before the end of the month as the storage situation gets worse, he said.

A utility buyer in the South observed that his mid $2.70s prices into Trunkline-East Louisiana Wednesday was nearly a dollar above the previous Friday’s level. His company is essentially keeping pace with Southern Natural Gas, he said, because its storage accounts are about 96% full now. For flexibility reasons, it will leave a little “trickle room” for further injections during the next couple of months, he said.

SunTrust Robinson Humphrey analyst Cameron Horwitz expects a 70 Bcf storage injection to be reported for the week ending Sept. 4. The higher sequential injection is largely attributable to a decline of more than 2 Bcf/d in gas-fired power generation amid a 25% week-on-week fall in cooling degree days, Horwitz said, “partly offset by slightly lower supply due to Midcontinent pipeline maintenance.”

Tim Evans of Citi Futures Perspective closely agrees with Horwitz in predicting a 71 Bcf build. Looking further ahead, Evans said he expects injections of 86 Bcf and 83 Bcf for the weeks ending Sept. 11 and Sept. 18.

©Copyright 2009Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.