Mixed pricing returned to the cash marketplace Friday, but this time declines were in a lopsided majority. Forecasts of mild to cool weather throughout much of the U.S. and Canada and the typical weekend drop in industrial demand were the chief price depressants.
The West, which had tended to see the greatest relative price strength earlier in the week, led Friday’s charge downhill. It had many of the larger losses among overall declines ranging from about a nickel to 80 cents. Flatness at Transco Zone 6 (non-New York City) and TGT Zone 1 notwithstanding, all of the gains from about a dime to 45 cents or so were recorded in the Gulf Coast.
It was only a matter of time before persistent concerns about the long-term impact of production shut-ins prompted by Hurricanes Katrina and Rita yielded to the short-term influences of moderating weather fundamentals and the heavy demand destruction caused by the storms, one source commented.
A trader who sells gas on behalf of several Gulf Coast independent producers provided a clue about Friday’s softening trend when she said she didn’t have time to talk Friday afternoon because “I’m up to my eyeballs” in curtailments of weekend supply. It seems that the pipelines she trades had been overscheduled on their laterals because of all the uncertainty about what production could flow and what couldn’t, she said.
Gulf of Mexico (GOM) gas output continued to inch higher. Minerals Management Service (MMS) said its tally of remaining shut-ins Friday stood at 7,941.02 MMcf/d, down a minuscule 38.7 MMcf/d from the day before (see related story). Cumulative deferred GOM production since Aug. 26, before Hurricane Katrina struck, climbed to 196.481 Bcf, MMS said.
The Northeast was getting rather chilly at night, but moderate daytime temperatures were leading to “beautiful” weather in general, a producer said. The Midwest was due to stay cool over the weekend before the return of warmer weather leads to potential record highs early this week, according to The Weather Channel (TWC). Most of the South had cooled off, but highs in the 80s and 90s were expected to resume by the end of the weekend west of the Mississippi River, TWC added. A cold front was advancing out of the Pacific Northwest into the northern Rockies, but ahead of the front temperatures would be five to 15 degrees above average, it said; in fact, Denver could be flirting with date-specific record highs from Saturday through Monday.
Henry Hub made it a full week of no cash trading as an operator-declared force majeure was extended through at least Friday (see related story).
“This market is driving us crazy. We’re dodging bullets all over the place,” said a Gulf Coast producer. Because of the fluid shut-in situation, he couldn’t be sure of what was safe to sell, even with $15 delivered prices in the Northeast. He noted that at times last week production area prices exceeded those in the market area, yielding negative basis. Texas was home to most of the readily available supply in the Gulf Coast, with sources being pretty spotty in Louisiana, he said.
The buyer for a Lower Midwest utility said local weather had been highly variable recently. “We had a record high here last week, then freezing temps this past Wednesday night, and might get up to record highs again [this] week,” she said. Her company did not buy any baseload gas for October. It’s still a shoulder month, she explained, and a summer term deal would remain in effect through the end of October. It might be necessary to get into the daily market if temperatures get colder later in the month, she said.
A marketer reported doing only a couple of Henry Hub deals for October “at the last moment” at basis of plus a nickel. He said he didn’t know if that gas would be able to flow during the first few days of the month.
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