Hurricane Isabel, packing super-powerful maximum sustained winds of nearly 140 mph and pointing at shooting the gap between southern Florida and Cuba, was accorded most of the credit Wednesday for rallying cash prices and sustaining a futures run-up. Cash market movement ranged from flat to slightly more than a dime higher. Most of the smallest gains were clustered at California and Rocky Mountains/Pacific Northwest points, which tend to be least affected by hurricane disruptions of offshore supply.
Isabel, a dangerous Category 4 storm, was projecting market punch over a long distance, because at 5 p.m. AST its center was still about 685 miles east-northeast of the northern Leeward Islands (northern half of the Lesser Antilles chain between Puerto Rico and Venezuela). However, the storm was gaining strength as it moved toward the west at nearly 12 mph, according to the National Hurricane Center. The westerly track was expected to continue for at least another 24 hours. Large ocean swells causing hazardous surf would begin to affect the Leeward Islands by Thursday, NHC said.
“There’s nothing really going on in the market today [Wednesday] other than maintaining a watch on Isabel,” commented a Southeast utility buyer. A day earlier, the hurricane’s turn toward a slightly more northwesterly heading had reduced trader concerns a bit by apparently aiming Isabel for an East Coast encounter, she said. But the reversion to a due-west direction again hiked the chances for a trek through the Florida-Cuba entryway to the Gulf of Mexico, an eventuality made all the more worrisome because very little land mass lay in that direction to either slow down Isabel or sap its strength, the buyer pointed out. “But you never know. Isabel could make a few corkscrew turns or do a couple of somersaults” in the next few days, she laughed.
Any approach to the offshore production area would be unlikely to begin until nearly the middle of next week. A Midwest marketer was already dreading the risk, though, saying Isabel’s market effects could last beyond the end of next week.
Meanwhile, Tropical Depression 14 was purely an afterthought as it began to dissipate Wednesday while lagging well behind Isabel. TD 14 was moving just north of the northwestern Cape Verde Islands off West Africa.
Cash sources were fairly impressed by the screen advance of nearly a quarter. “I can’t think of anything other than the hurricane threat behind the big Nymex rise,” said an East Coast utility buyer. “Everything else, especially storage, is still looking bearish.” Traders say that nearly all daily cash business is normally finished by the time EIA issues its Thursday morning storage report. Because the report will be delayed by Sept. 11 commemorative observances this Thursday, it should have even less same-day impact than usual. However, the buyer said she needed to make a couple of hedging transactions on behalf of a customer that would be based on whatever the storage number is, so she guaranteed at least some activity after the report’s issuance.
A Canadian producer said it was impossible to overlook the hurricane factor, but there also were some technical issues in the Nymex run-up. He reported that the funds traders were short and out buying Wednesday, “and it certainly is an oversold gas futures market.” California weather is starting to heat up again, so he expects demand for Alberta supplies to be gas going up also. Weekend temperatures in the Calgary area were pretty warm around 90 degrees, he said, “but it’s cooled off again now.”
A Midwestern marketer had no new prices to report, saying, “We didn’t like like the prices we saw.” Also, weather-related demand was too slack to force the company to buy any new supplies, she added. Regional temperatures should get even more comfortable next week with daytime highs in the 70s and nighttime lows in the 50s, the marketer said.
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