Weather fundamentals are weakening a bit, but the prospect of much higher prices this winter coupled with a tight supply situation kept quotes on the rise Wednesday at nearly all points. A few flat to lower points kept the gains from extending across the board.

Increases ranged from about a nickel to half a dollar in a majority of cases, but Florida Gas Transmission Zone 3, which was highly vulnerable to Hurricane Katrina-caused shut-ins, soared by about $1.40 and recorded a top quote of $14. Apparently the supply situation is significantly better in FGT’s Zone 2, which was one of Wednesday few declining points with a fall of 45 cents.

Northwest-South of Green River took by far the biggest price hit of about 80 cents due to a Declared Deficiency Period scheduled Thursday by the pipeline, which will cut southbound flows in the Cisco Compressor Station segment to zero (see Transportation Notes).

Air conditioning load was dwindling after a cold front took temperatures lower in the Midwest Wednesday and was due to push on into the Northeast and do the same thing there Thursday. Very hot weather will be limited for a while to the lower South and Southwest, as much of the West will be experiencing seasonal temperatures for mid-September.

But fundamentals have had limited influence on cash prices in the last year or two, and so it was again Wednesday. Two Bush administration officials touring the Katrina-ravaged Gulf Coast Tuesday may have given both the cash and futures markets a boost by expressing “great concern” about the winter supply picture being threatened by what looks to be long-lasting cuts in offshore production and damage to energy infrastructure (see Daily GPI, Sept. 14).

Gulf of Mexico shut-ins actually declined at a slightly higher rate than in recent days, Minerals Management Service said. It counted 3.518 Bcf/d as still offline Wednesday, down 202 MMcf/d from the previous day (see related story).

Hurricane Ophelia continued to make its way northeastward just off the North Carolina coast Wednesday, promising a drenching there and in parts of Virginia through Thursday.

One source noted that traders’ formerly vaunted perception of cash prices “following the screen” may be outdated, as the physical market ignored Tuesday’s second straight day of October natural gas futures dropping a quarter or so and went on to post widespread advances on the next day again. It will be interesting to see how cash traders react to Wednesday’s action at Nymex, he said, in which the October contract rebounded by just over 40 cents. All energy futures showed impressive gains in response to the government’s Wednesday morning report of a much greater than expected plunge in U.S. crude oil inventories last week.

“Why are prices so strong again today?” a Gulf Coast producer asked rhetorically before answering, “Because they can be.” More seriously, he noted that such a vast outage of Gulf of Mexico production threatening to endure was propping up prices even when he was seeing a drop in power generation demand for Thursday. “I think a lot of current spot demand is for replacement” of Gulf Coast baseload supplies that people thought they had secured during bidweek but aren’t getting, he continued.

The producer noted that his company’s offshore production is slowly returning, but in some cases it must wait for outages of processing plants and/or pipeline infrastructure to be resolved. That might take months for three big plants in southeast Louisiana that got flooded: Venice, Yscloskey and Toca, he said (see related story).

A Northeast utility buyer said his company is trying to maintain business as usual as much as possible “even with prices out of our control.” The utility is still not getting its full allotment of Gulf Coast supplies due to Katrina shut-ins. It’s a fairly large shortfall, he said, but the company has been able to make up for most of it with Canadian gas.

A Midwest marketer said he will continue to procure gas on behalf of his end-user clients, but he is pushing ahead on promoting alternative fuels like wood pellets for home heating. He expects people to become more receptive of such things with energy prices shaping up like they are for this winter.

©Copyright 2005Intelligence 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.