Initial expectations of a rapid return of Gulf of Mexico (GOM) oil and gas production from the outages caused by hurricanes Gustav and Ike appeared to be overly optimistic by Wednesday, and both the cash and futures markets were firmer in response. And although substantial cooling load is still subpar for mid-September in most areas, some slightly premature heating load is arriving to displace it, especially in the Northeast.
A large majority of points ranged from flat to about 45 cents higher. Several scattered locations, primarily in South and East Texas, fell by a little less than a nickel to nearly $2.75.
Even though Florida Gas Transmission (FGT) kept a longstanding Overage Alert Day in effect through at least Wednesday, there were some signs that it may be about to end as Florida Gas Zones 1 and 3 and the Florida citygate recorded triple-digit losses. The citygate had by far the day’s biggest declines.
Minerals Management Service (MMS) said only a minor reduction of offshore gas losses was achieved Wednesday, based on reports from 83 companies. The agency tallied 6,087 MMcf/ of gas shut-ins, down only 144 MMcf/d from Tuesday. The already slow pace of restoring oil production from the Gulf of Mexico continued, with Wednesday’s 1,246,470 b/d count of outages representing a decline of just 17,260 b/d. Evacuations of platforms and mobile drilling rigs had fallen to 425 and 50, respectively, MMS said (see related story).
It isn’t quite officially fall yet, but much of the eastern two-thirds of the U.S. has been feeling that way recently. Southern and Midcontinent highs in the low to mid 80s mean conditions are still fairly moderate in those regions, but chilly temperatures are getting more frequent in the Northeast and Midwest. In fact, much of northern New York state and northern New England will experience freezing or subfreezing temperatures Thursday night or Friday morning, The Weather Channel said. Midwest peaks are limited to the 70s, which translates to cool but not especially cold.
Moderate temperatures dominate in the West, although highs in the upper 90s continue in the desert Southwest and the Pacific Northwest is cooling off rapidly from a brief spell of heat. The West, which has had an excess of supply to deal with several times this summer, was experiencing the opposite situation to some degree Wednesday. El Paso said it had set the probability of declaring a Strained Operating Condition or Critical Operating Condition to high because of low linepack. Recent takes have been in excess of scheduled deliveries, the pipeline said, and power plants in the Phoenix area have drafted its the system by approximately 224 MMcf. “It is anticipated that loads in the Phoenix service area will increase [Wednesday] with the news this morning of the shutdown of Unit 3 at the Palo Verde nuclear power plant in Arizona,” El Paso continued. “The continuation of takes in excess of scheduled deliveries increases the potential for a low linepack condition. Additionally, Washington Ranch storage is currently unavailable due to scheduled maintenance.”
“At least we’re getting noticed for something,” a Florida utility buyer laughed in referring to his area having the highest-priced market recently. Things are starting to settle down a bit, though, he said, noting that his citygate price of $8.75 Wednesday was down more than $2.50 from Tuesday. FGT is getting more Mobile Bay production coming back on-line, and the newly operating Southeast Supply Header is putting more gas into Gulfstream, he said. Even though the market area seems to be pretty well supplied now, FGT might keep its Overage Alert Day in place a while longer because of the offshore supply losses.
Saying her area was “comfortable” in the low 70s Wednesday, a marketer in the Upper Midwest said she still wasn’t seeing much in the way of heating load. It’s not freezing yet at night, she added. Her company is buying some spot gas “almost every day” to ensure that its customers stay ahead of schedule on refilling storage.
A Calgary-based producer said he has seen almost no trading desk action in recent days because his company assigned him to help formulate its response to problems in the financial markets. “Any trading company will have some exposure to the credit market crisis,” he said.
SunTrust Robinson Robinson Humphrey/the Gerdes group analysts said they anticipate a storage injection in the 60-70 Bcf range to be reported for the week ending Sept. 12 after taking into account almost 6 Bcf/d of off-line GOM supply and roughly 2 Bcf/d of reduced demand stemming from recent hurricane activity. “The injection should be largely in line with last year’s injection though below the 81 Bcf long-term average,” the company said. “After accounting for supply/demand disruptions associated with the recent hurricanes, we expect storage entering the ’08/’09 heating season should be [plus or minus] 3,400 Bcf.”
In its six- to 10-day forecast for the Sept. 22-26 workweek, the National Weather Service (NWS) said it expects above-normal temperatures throughout the Northeast and Midwest to as far west as a line that runs northward from the western Texas Panhandle through the western edges of Nebraska and the Dakotas. The above-normal area also includes most of the South except for all of Florida and coastal areas from North Carolina through South Texas. Below-normal readings were predicted for the Pacific Northwest as far south as much of Northern California and extending into the Rockies to southern Utah and the eastern ends of Wyoming and Montana.
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