In a sign that perhaps the continuing large outages of Gulf of Mexico (GOM) production may be weighing on the market a bit more than before, prices were about evenly mixed between flat, higher and lower Thursday. Significant cooling load remains rather scarce outside the area from Texas through the desert Southwest to interior California, and the previous day’s futures gain of less than a penny was essentially neutral for the cash market.
Rockies quotes continued to rise about a dollar or more in leading prices ranging from flat to up about $2.15. The rest of the market saw losses of 2-3 cents to about 40 cents. Northeast citygates tended to record most of the largest declines.
In reporting a 90 Bcf addition to storage during the week ending Aug. 29, the Energy Information Administration was right on the money as far as consensus expectations went. The report was nominally bearish in comparison with much smaller year-ago and five-year average builds, but that had been anticipated by Nymex traders (see related story). The October natural gas contract ended the day 5.8 cents higher.
Texas Eastern was typical of pipelines with GOM production links in saying that local parish governments in South Louisiana were continuing to enforce limited return access, and that was limiting assessments of hurricane damage to pipeline facilities, third-party gas processing plants and offshore infrastructure. However, several pipes announced the resumption of flows at some meters (see Transportation Notes).
One reason for growing firmness in the cash market is that the process of recovering from GOM shut-ins is going slower in its initial stages than many had expected due to few signs of substantive damage from Hurricane Gustav. Minerals Management Service reported that only another 300 MMcf/d of gas output had been restored since Wednesday, leaving 6,477 MMcf/d still off-line (see related story).
Tropical Storm Hanna continued to promise demand destruction at the eastern end of the South, with its landfall projected for around late Friday or early Saturday at the coastal junction of the South Carolina and North Carolina borders as of Thursday afternoon. The Charlotte, NC, high around 91 Thursday was expected to be 10 degrees lower Friday.
Category Four Hurricane Ike is still expected to follow roughly the same ocean trail blazed by Hanna and should keep East Coast weather relatively cool for a good while. Underscoring how the hurricane season is entering its peak period, an area of disturbed weather popped up to the west of still-remote Tropical Storm Josephine Thursday, but the National Hurricane Center considers the new system as having low development potential.
Florida Gas Zone 3 fell about 40 cents despite Florida Gas Transmission reinstating an Overage Alert Day (see Transportation Notes). However, the Florida citygate rose nearly 30 cents.
Asked if Rockies traders were getting more creative about working around the Rockies Express (REX) segment outage that began Wednesday and will last through Sept. 26, a producer in the region said no, that was virtually impossible because there’s almost no other takeaway capacity available. However, noting that Ultra Petroleum had said in a recent conference call it was shutting in 100 MMcf/d during the REX outage, he suggested that maybe enough other producers were also shutting in their gas to make a difference in partially offsetting the loss of REX capacity. Many of them will not announce shut-ins as Ultra did, he said.
It’s ridiculous to sell at such low prices this week when two to three months down the road winter-like weather will be arriving and the Rockies market should be much stronger, the producer continued. He added that a company staffer had said it was ridiculous that REX should need more than three weeks for its testing. It’s only a 27-mile segment affected, after all, and that should take a week to 10 days, tops, according to his colleague.
A marketer in the Upper Midwest said her region had been hot and muggy early this week, but was getting back to “nice and cool” again. She noted that significant softness in both the cash and futures markets while Hurricane Gustav was taking out about 95% of GOM gas production made it apparent that the market was not missing the shut-in supplies. As her boss sees it, a lot of new onshore production in the shale plays more than made up for the offshore outages, she said.
CenterPoint gas has gotten “pretty cheap” relative to the rest of the Midcontinent because of no transport from the Perryville Hub in northwest Louisiana due to Hub maintenance restrictions, a producer said. He said his company accidentally got into a long supply position last month and got burned by it, but won’t make that mistake again. Such an occurrence indicates there were a lot more sellers in the market than buyers, he added.
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