Call it “storm hype” if you will, but there was no doubt that the ominously growing threat to Gulf of Mexico production from then-Tropical Depression Five (upgraded to Tropical Storm Ernesto Friday afternoon, well after cash trading had finished) was a major reason why prices increased at a sizeable majority of points Friday.
A screen gain of 20.4 cents on Thursday provided extra cash support to largely offset the negative influences of generally mild to cool weather forecasts for most of the northern U.S. and Canada and the drop of industrial load that typically accompanies a weekend flow period.
A few scattered flat to nearly a dime lower points reestablished the pattern set on Monday and Tuesday in which a small section of the market avoids overall firmness. Upticks ranged from 2-3 cents to nearly 30 cents, with Gulf Coast and Northeast points tending to see most of the largest gains while the lowest increases and minor softening concentrated mostly in the West.
The National Hurricane Center’s (NHC) last Friday afternoon posting of Ernesto’s projected path had it approaching the deepwater platforms offshore Louisiana by early Wednesday afternoon. However, the tracking was shifted enough to the northwest Friday that NHC expected the storm to pass over Cuba’s western end early Tuesday. That would have the dual effect of slowing Ernesto’s progress and weakening its strength.
As of Friday afternoon producers were taking a “wait and see” attitude on Ernesto, with no announcements of evacuations or shut-ins (see related story). They could afford to wait, since the storm was still expected to be south of Cuba Monday afternoon, and the threat might be receding by then. However, because of the great distances involved, a marketer said he thought the deepwater producers might start evacuating their farthest out platforms over the weekend, ready to bring the personnel back quickly if the storm veers sharply away from the production area or breaks up beforehand.
At 5 p.m. AST Friday the center of Ernesto was about 300 miles south-southwest of San Juan, Puerto Rico and about 660 miles east-southeast of Kingston, Jamaica, the NHC said. Its movement toward the west-northwest at nearly 16 mph was expected to continue over the following 24 hours. Maximum sustained winds were about 40 mph, with additional strengthening possible over the next 24 hours, the NHC said.
Regardless of the storm, the general U.S. outlook will turn just a tad more bearish for prices early this week, with highs in the South due to be slightly receding though midweek and moderate temperatures remaining in northern market areas. Highs in the 90s will occupy much of the West.
The storm helped generate a screen rise of 7.8 cents to $7.157, although that represented a major pullback from the September contract’s intraday high of $7.520.
Cash prices might have gone up even more Friday if it wasn’t for the mild weather in the North and the weekend effect, said a Houston-based marketer. But traders didn’t want to get caught in too-short supply positions over the weekend while facing the possibility of a much more threatening Ernesto causing price spikes Monday, especially if major evacuations and/or shut-ins have begun, he said. Transco Station 65 was rising in late deals, he said, while Chicago citygate movement tended to be down at first and then back up. He noted that various Tennessee 800 Line maintenance constraints should be getting cleared up by the end of the month, leaving a clean slate for September.
The marketer reported selling September Chicago packages at basis of minus 23 cents Friday, but said he supposed basis may have tightened later as the screen wended its way back down from the daily peak. He also saw some Northern Natural-demarc going at minus 53 cents basis.
A Northeast utility buyer said his company will be buying some baseload gas for September, but “we won’t need much” since it’s a shoulder month in which the utility rarely sees very much load. “Our storage is in good shape,” he proclaimed. Area temperatures would be getting a little warmer over the weekend, but would remain quite comfortable, he said.
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