The vagaries of estimating a hurricane’s future path came into play in the spot market again Wednesday. Whereas prices fell across the board Tuesday in reaction to Hurricane Ike’s projected path shifting a bit to the south, a revision that brought the storm back slightly closer to the Gulf of Mexico (GOM) production area was sufficient to rally quotes at most points Wednesday.

Declines at Florida Gas Zone 3 and the Florida citygate — in spite of Florida Gas Transmission still having an Overage Alert Day in effect Wednesday — and flat numbers at Northwest-South of Green River were the exceptions to overall firmness. Gains ranged from about a nickel to half a dollar. They tended to be smallest in the Rockies but fairly evenly distributed elsewhere.

In a very fluid situation, offshore operators continued evacuation and shut-in procedures Wednesday (see related story) and Gulf Coast pipelines announced various restrictions, service suspensions and coastal evacuations that hampered their operations (see Transportation Notes).

As could be expected, GOM shut-in and evacuation statistics started ascending again, both as a result of halted Hurricane Gustav-related recovery work and new production suspensions due to the approach of Ike. Minerals Management Service (MMS) said that based on reports from 67 companies received by 11:30 a.m. CDT, gas shut-ins had risen from 4,795 MMcf/d Tuesday to 5,405 MMcf/d Wednesday. It also reported increases of oil shut-ins from 1,007,389 b/d to 1,246,595 b/d; of platform evacuations from 167 to 452; and of mobile drilling rig evacuations from 44 to 81.

Citi Futures Perspective analyst Tim Evan calculated from MMS figures that through Tuesday, cumulative natural gas production losses in the GOM since Aug. 29 have totaled 62.462 Bcf.

The National Hurricane Center (NHC) still expected Ike to make landfall slightly north of Corpus Christi, TX sometime Saturday morning and then proceed almost due northward through east-central Texas. However, the approach to the Corpus Christi area was expected to be slightly north of the path being projected Tuesday, which would bring the storm a little closer to Central and Western GOM infrastructure than before.

Ike had reached Category Two hurricane status with maximum sustained winds of nearly 100 mph (the Saffir-Simpson Scale threshold for Category Two is 96 mph). NHC characterized it as “a very large tropical cyclone” with hurricane-force winds extending outward up to 90 miles from the center, which at 4 p.m. CDT was about 720 mile east of Brownsville, TX and about 370 miles south-southeast of the mouth of the Mississippi River. Its motion was toward the northwest at about 8 mph.

Hurricane-related losses of production were about all Wednesday’s general price rebound had going for it, although there may be a bit of heating load in Canada and U.S. areas near the Canadian border. Showers and thunderstorms forecast for Thursday are sapping much of the late-summer heat out of the South, leaving few locations there with temperatures due to get above the low to mid 80s. The northern market areas and much of the West have already been ranging from mild to chilly for some time, leaving only the desert Southwest with any appreciable heat remaining.

Despite PG&E keeping a high-inventory OFO in effect through at least Thursday, its considerably looser imbalance tolerance (see Transportation Notes) allowed Malin and the PG&E citygate to rise about 30 cents each.

It was the more threatening shift of Ike’s path that generated the cash market rally, a Houston-based marketer said, but it won’t happen again. Obviously Nymex traders didn’t put much stock in the hurricane developments, he said, pointing out that October futures fell 14.2 cents. He was pretty sure that cash numbers will reverse course and head lower Thursday. Prospects for another rally in the near term appear slim, he said, citing a balance-of-month Henry Hub deal being done at $7.48, more than 15 cents less than Wednesday’s average.

“It’s kind of surprising, isn’t it,” the marketer continued, that storm threats to GOM production don’t set off spikes like they used to (although Wednesday was something of an aberration, he noted).

A Gulf Coast trader in the Dallas-Fort Worth area expressed sympathy for residents of the Texas coast, but she welcomed the projection that Ike would head close to due north after its expected landfall slightly north of Corpus Christi. “We need the rain,” she said. She agreed that prices almost certainly will be lower Thursday, citing an on-line Henry Hub deal for Friday flow at $7.46, about 20 cents down from Wednesday’s average. However, it’s likely to be a tricky market Thursday, she said, noting that many bids and offers for Friday were as much as 50 cents apart.

The National Weather Service’s (NWS) six- to 10-day forecast for the Sept. 15-19 workweek calls for below-normal temperatures between a line stretching northeastward from the western tip of Texas to the northern end of Michigan (excluding the Upper Peninsula) and another line from the eastern end of the Florida Panhandle through lower New England and western New York (excluding the coastal sections of Georgia and the Carolinas). Above-normal readings are expected in the lower half of Florida’s peninsula, and everywhere west of a line running northward through central Arizona before curving to the northeast through southeastern Utah to eastern North Dakota.

Analysts Michael Zenker and George Hopley of Barclays Capital expect the storage report for the week ending Sept. 5 to show an injection of 62 Bcf, “reflecting the arrival of Hurricane Gustav, balanced by a Labor Day demand pullback.”

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