It was hard to tell from mostly moderately lower cash prices Monday that a huge amount of gas had been taken off the Gulf Coast market, especially since Gulf and Northeast points tended to see the lion’s share of declines. The storm-induced offshore shut-in volume was expected to grow as the week wears on, so in consideration of great strength in the energy futures complex Monday, sources felt confident in predicting soaring prices Tuesday in most markets.

Early Monday afternoon the Minerals Management Service in New Orleans said shut-in reports sent to the agency had reached a whopping 3.2 Bcf/d of gas and 64,000 bbl/d of oil. Non-essential personnel had been evacuated from 169 platforms and 47 drilling rigs in the U.S. Gulf of Mexico, MMS said. It listed reporting companies as AGAPE, Anadarko (RME), BP, Burlington, Callon, ChevronTexaco, El Paso, Energy P, Energy R, Freeport McMoRan, Helis, Kerr-McGee, Linder, Marathon, Maritech, Newfield, Ocean, Panoco, PRS, Samedan, Seneca, TotalFinaElf, Unocal and W&T.

Hurricane Isidore had been downgraded to tropical storm status after moving ashore over Mexico’s Yucatan Peninsula Sunday, and it continued a slow wobble around the peninsula about 50 miles south-southeast of Merida as of 4 p.m. CDT Monday, according to the National Weather Service. It could die out on land, but a northeastward drift was expected to change to northwestward movement that would take Isidore back into the Gulf of Mexico early Tuesday, where it is likely to become a hurricane again, NWS said.

The weatherunderground.com web site projected a mildly strong likelihood of Isidore approaching the southwest Louisiana coast within 72 hours of 5 p.m. CDT Monday. Weather 2000 expected Isidore to reset its course — or not — by Tuesday morning, although the forecasting firm also was leaning toward the storm moving into the Gulf again and regaining hurricane status. It had been a fairly strong Category 3 after it passed over Cuba and was described as a very large storm, widely spread out, so that even if the eye hit on the southern Texas coast, damage could spread into the eastern GOM producing region. Its slow pace would spread the impact out into Friday.

September is bolstering its reputation as the prime time of the hurricane season. After nothing of any significance through the first three months of the Atlantic season that began June 1, a flurry of storms has come along this month. In addition to the major threat of Isidore, Tropical Storm (TS) Lili was getting better organized as it moved through the Windward Islands (the lower half of the island chain between Puerto Rico and Venezuela) Monday afternoon. At 5 p.m. AST Lili was about 15 miles east of the Grenadine Islands. TS Kyle was a threat only to shipping interests in the open Atlantic as it headed slowly south-southwest about 875 miles east of Bermuda.

“Obviously the shut-ins were just barely getting under way Friday and must have continued over the weekend,” said one source. “It may have seemed that with Isidore heading for the Yucatan, the offshore danger was easing off, but producers just couldn’t take any chances with the lives of their workers, because the storm just as easily could have continued heading toward New Orleans.”

An eastern utility buyer who was among those experiencing storm-related cuts in offshore nominations over the weekend, upon being informed of the MMS update on production shut-ins, commented, “If this much has been shut in with the storm still so far away, just imagine what it’s going to be like when Isidore heads north again.”

A seasoned trader with some experience on the E&P side of things observed that well shut-ins are nothing like turning a faucet on and off, and it’s highly likely that the shut-in volume will keep growing each day this week. The more often an operator shuts down and then restarts a well’s flow, the more likely it is to get extra water in the production, “and that’s expensive to fix,” he explained. Once the wellbore flow is shut off, a hydraulic column can overtake the hydrocarbons and get mixed up with them, and then the well must be dewatered, he said. This is why no one should expect a well that’s already been shut in to be turned back on for a couple of days of revenue only to be shut in again, the trader said.

He went on to say that offshore producers “aren’t logistically in control of their own destiny.” The major offshore helicopter firms, such as PHI and Evergreen, don’t exactly get hailed like taxis. “They tell platform operators, ‘We’re going to be in your facilities’ neighborhood at such-and-such a time. Do you have any passengers for us?'” If they don’t get aboard then, they risk getting left behind, he added. Producers face a double-barreled threat with Lili coming along behind Isidore, so they might as well wait both of them out, he concluded.

Despite generally mild weather outside Florida and the desert Southwest, prices tended to see their biggest gains in the Rockies/San Juan and California markets Monday. PG&E citygates and PG&E-Topock numbers rose about 20 cents after the utility discontinued a high-linepack OFO after Monday. One western trader said it was quiet in his San Juan and California bailiwick, saying, “About all we’re hearing is storm stuff.”

Besides being on the cool side, Pacific Northwest points recorded the day’s top losses as supply continued to come back on the market following Westcoast’s completion of the Fort Nelson Plant turnaround. About 650 MMcf/d was coming out of the plant tailgate in Sunday’s daily report, one marketer said. It tended to affect Westcoast Station 2 most, which started the day around C$4.20, nearly C40 cents down from Friday, and dropped further into the mid C$4.00s, he said. Sumas numbers also fell as trading went on, he said.

A marketer commented that it’s “hard to imagine who would want to sell this market off with so much happening on the storm and crude oil fronts (crude futures settled well over $30/bbl Monday after Iraq said it would not comply with any new U.N. resolutions on weapons inspections, and the heating oil contract also soared). He sees the storms creating strong prices for October bidweek as well as in the swing market.

Another source provided some confirmation of strong bidweek pricing, reporting an October Sumas deal done Monday at $3.09. That’s more than half a dollar up from NGI‘s September index of $2.53.

However, another trader commented, “I think the market is starting to adjust for the storage capacity nearly being full. Opal baseload for October was $1.50 last Thursday, and today [Monday] it’s $1.30, down 20 cents for the prompt month in the last two trading days.”

“I’ve been keeping busy with several producers wanting to lock in prices for December and January while they’re seeing these strong screen prices going up,” a Midcontinent marketer said. “They don’t want to wait and risk the mild winter that some analysts are predicting now.”

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