Cash prices recorded moderate rallies at most points Friday as revised tracking projections for a much strengthened Hurricane Katrina had the storm approaching more closely to the eastern end of Gulf of Mexico (GOM) production operations than had been anticipated Thursday. But Florida Gas Transmission (FGT) Zone 3, which would be highly susceptible to the impact of Katrina shut-ins, shot up more than $3 on average with peak quotes of $14 being reported.

Offshore shut-ins and evacuations were still minimal as of Friday afternoon, but they were expected to grow rapidly over the weekend after the National Hurricane Center (NHC) radically shifted its anticipated path for Katrina to have the storm approaching the Pascagoula, MS area by early Monday afternoon. At that point it was expected to be a Category 3 or “major” hurricane, that is with sustained winds between 111 and 130 mph, NHC said. That would cause a major impact not only for Mobile Bay production but also for the numerous facilities offshore southeastern Louisiana. Shut-ins could spread as far west as the central or even western Louisiana coast.

A few mostly small and scattered price drops were interspersed with flat to higher quotes Friday, with gains ranging up to about a quarter in a majority of cases.

The general weather outlook for the weekend was much the same as it had been in recent days: very hot weather would continue from the western end of the South through the desert Southwest, but cold fronts were due to keep the Northeast and Midwest moderate, while another front would cool off the Pacific Northwest late in the weekend, according to The Weather Channel.

Katrina, which weakened briefly to a tropical storm while passing over southern Florida Thursday night, emerged into the southeast GOM Friday morning and rapidly got even stronger than before, being rated as a Category Two hurricane with maximum sustained winds of nearly 100 mph, the NHC said. More important to gas interests than its rise in power was the fact that the NHC at that point expected Katrina to be approaching the western end of Florida’s Panhandle by Monday morning instead of the central Panhandle as previously projected.

However, Friday’s cash trading had long been completed by the time NHC updated its projection late that afternoon to indicate a much greater threat to offshore production than before. One source said he expects a big spike in Sunday evening Access futures trading as a result of weekend developments.

Producers in the easternmost end of GOM operations, who had already begun precautionary evacuations of nonessential personnel on Thursday, stepped up their efforts Friday. Minerals Management Service said that based on reports received from four companies by 1 p.m. CDT, 12 platforms and nine drilling rigs had been evacuated. It had not gotten any reports of shut-in production of either gas or oil at that point.

However, a spokeswoman for Total E&P USA confirmed that the company had shut in 259 MMcf/d and 16,500 bbl/d at two platforms and one subsea gas transport system due to Katrina’s approach.

A spokeswoman said Exxon Mobil had initiated a Phase 1 hurricane alert for its Eastern GOM and Mobile Bay operations and was no longer transporting workers out to platforms, but still had not made any evacuations or shut-ins as of late Friday afternoon.

By early afternoon the September natural gas futures contract had once again matched its Wednesday peak of $10.02 after wavering on both sides of unchanged Friday morning. The screen subsequently retreated to a daily close of $9.792, up 2.2 cents. Crude oil for October delivery plunged more than a dollar due to profit-taking, even though worries persisted about hurricane-related supply shut-ins.

Nearly 1.5 million customers lost power during Katrina’s traversal of southern Florida, and about 1.1 million still had their lights off around midday Friday, according to Florida Power & Light reports (see story in Power Market Today).

A marketer said he didn’t doubt the validity of the $14 quotes for FGT Zone 3 because he saw the point being offered at $14 and $15 on an online trading service, although he didn’t notice the offers getting hit. “If Mobile Bay and Destin [Pipeline] go away, FGT Zone 3 gets bottlenecked,” he said.

A Midcontinent/Midwest trader said the recent trend in natural gas futures seemed to be “break $10, come back off; break $10, come back off.” His heart tells him it’s about time for a significant Nymex downturn, he said, but his head tells him there’s “more room to run up than down. I see more pain ahead.” When traders return to their offices Monday morning, “we will see drastically different futures, either up or down,” depending on hurricane developments over the weekend.

A Texas marketer reported these September bidweek fixed prices traded Friday: El Paso-San Juan, $7.82-87; Waha, $8.38-48; Panhandle Eastern, $8.32-42; Northern Natural-demarc, $8.60-65; and ANR Southwest, $8.32. She mused that it used to be obvious what the dollar digits would be during bidweek, but traders have had to be more specific about that in the last couple of years as prices have ballooned. Any new September price direction Monday likely will depend on what the hurricane does over the weekend and the screen’s response, she said.

Another marketer said a lot of basis trading for September was going on Thursday, but bidweek activity got a lot quieter Friday. The changing hurricane picture probably prompted people to hold back and await weekend developments, he theorized. Chicago citygate basis had gotten even weaker to minus 45-50 cents Friday due to the screen hitting its $10.02 peak, and not that much was happening afterward when the contract retreated, he said. Midwest traders will have to work around the constraint of NGPL cutting 8% of firm service on the Iowa-Illinois Line for all of September and half of October due to maintenance, he noted.

A Houston-based source said national weather will be hotter at the beginning of September but cooling off later. A lot of people were confused about rolling blackouts Thursday in Southern California (see story in Power Market Today), thinking they were due to electricity supply shortfalls and not the real reason of a transmission outage, he went on. He also noted that a lot of his customers are very upset about the prospects of even higher September gas prices because “there’s nothing out there that they can see to validate these prices.”

Citigroup analyst Kyle Cooper made an initial estimation of a storage build in the low 60s Bcf to be reported for the week ending Aug. 26.

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