Most points saw little change Thursday in moving up or down a dime or less from flat. The arrival of early fall-like weather in northern market areas and the screen’s prior-day 13.3-cent drop brought a quick end to Wednesday’s all-points rally. However, the formation of Tropical Depression Five in the eastern Caribbean Sea and its likely journey straight into the Gulf of Mexico stand a good chance of raising prices Friday.
Flat quotes were common, and few points saw a change in either direction that rose above single digits. Movement ranged up to a little more than a dime higher and (with one exception) up to about 15 cents lower. Most of the losses of more than a dime were concentrated in the Rockies.
A Florida citygate quote representing a plunge of 40 cents was atypical of the rest of the market, but came after Florida Gas Transmission lifted an Overage Alert Day. The effect also was felt in Florida Gas Zone 3, which was the only Louisiana point to register a double-digit drop.
The National Hurricane Center (NHC) made it official late Thursday afternoon: not only had the fifth tropical depression of the 2006 Atlantic hurricane season formed as it passed through the Windward Islands (southern half of the Lesser Antilles chain between Puerto Rico and Venezuela), but it was expected to rate the name of Ernesto within the following 24 hours. At 5 p.m. AST the center of TD5 was about 155 miles southwest of Martinique and about 455 miles south-southeast of San Juan, Puerto Rico. It was moving west at nearly 22 mph, NHC said. Maximum sustained winds were near 35 mph, the threshold for tropical storm status.
The ominous aspect for the gas industry is that NHC’s projection of TD5’s path over the next five days has the depression threading its way between Mexico’s Yucatan Peninsula and the western end of Cuba by Tuesday afternoon. There is a chance that TD5’s current proximity to the South American land mass and likely passage close to Jamaica may both slow it down and weaken it to some degree.
Based on the tropical developments and the screen’s strength Thursday, one source predicted that cash prices are likely to rise at most if not all locations Friday despite weak weather fundamentals in northern market areas and the weekend effect on prices.
Tropical Storm Debby may still become the season’s first hurricane eventually, but it had faded out of the market picture for being expected to curve back out into the Atlantic and never approach any land masses.
The Energy Information Administration was fairly well in line with market expectations in estimating a 57 Bcf storage injection for the week ending Aug. 18. Nymex traders’ response in sending September gas futures up 20.4 cents on the day may have seemed a little overly bullish, but they likely based the move higher on the tropical activity.
The southern half of the U.S. continues to provide the bulk of cooling load for gas currently. Most sections of the Midwest and Northeast are not expected to get above the 70s Friday.
A Midwest marketer confirmed that her area is enjoying quite mild weather. Her company has started buying daily gas again, she said, “but just a little because the price is still too high.” On the eve of bidweek, she reported hearing September basis at Michigan citygates of minus 3 cents to flat for Consumers Energy and minus 10 cents for MichCon.
The market has been real quiet lately as everybody seems to realize that the summer is nearing its end, said a western source. About the only excitement right now, he added, “is waiting for the first big storm of the year.”
The Anniversary Approaches: On Friday, Aug. 26, 2005, most of the business day had passed with the NHC still projecting that Hurricane Katrina would make landfall in the Pensacola, FL area near the Alabama border, which would have had little impact on most offshore interests. But a check of the NHC website late that afternoon revealed a drastic change in the expected path, leading Daily GPI‘s cash market coverage in the Aug. 29 issue to be headlined “Most Prices Up as Hurricane Threat Grows; Expected Path Shifted Toward Southeast LA” (see Daily GPI, Aug. 29, 2005). Of course, we all know now that the new prediction was substantiated in spades and how much devastation was wreaked on Gulf of Mexico oil and gas infrastructure and production and on Gulf Coast residents (reinforced less than a month later by Hurricane Rita).
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