Except for declines of less than a dime in San Juan Basin and at the Southern California border into PG&E, prices were up across the board again Wednesday. Tropical Storm (TS) Cindy’s disruption of offshore output was rapidly fading, but the potentially greater menace of Hurricane Dennis this weekend continued to stoke supply worries. A 30.4-cent screen spike Tuesday also provided residual support for the cash market.
Wednesday’s gains were more subdued than on Tuesday in ranging from a couple of pennies to half a dollar. The largest increases tended to cluster in the Gulf Coast and at Northeast and Midwest citygates. Western points saw many of the smaller upticks as a high-linepack OFO by PG&E (see Transportation Notes) was a negative factor for regional prices. Despite the OFO, Malin and PG&E citygate quotes rose about 15 cents and a little less than a dime respectively.
Cindy was rapidly becoming old news, having been downgraded to a tropical depression not long after making landfall in the New Orleans area. It left behind offshore shut-ins that the Minerals Management Service said topped 750 MMcf/d Wednesday (see related story), but restoration work was proceeding quickly. Several pipelines said all of their shut-ins had been eliminated already. Other than power outages that forced the shutdown of a few refineries in southeast Louisiana, no significant damage from the just-passed storm was reported.
Generally hot-weather conditions are staying static for the time being in much of the nation, although the Upper Plains could anticipate a cold front moving in from the west Thursday. Despite the South receiving a lot of cooling rain from Cindy, regional highs in the 80s and 90s were expected to be widespread Thursday.
Western prices may succumb to excess supply and weak demand issues Thursday, but the rest of the market is expected to stay firm due to Dennis concerns and Nymex’s energy futures complex going on another tear Wednesday. The natural gas screen rose 21.3 cents to $7.688, but most of the attention was focused on the petroleum product trading pits. Crude oil set another record for a prompt-month daily settlement in skyrocketing $1.69 to $61.28/bbl (dealing a heavy blow to the stock market in the process). At least one person was particularly incensed at the dime spike in unleaded gasoline prices, sending this note to futures analyst Jay Levine of Advest Inc.: “Has someone gone mad in the HU [heating oil] pit today? There’s only a small number of refineries that lost power for a short time and people think that it’s ‘day after tomorrow.'”
A Gulf Coast marketer noted that his company had some supply cuts from Cindy, but said it wasn’t anything that couldn’t be worked around. He thought it curious that he lost all of his nominated gas from Texas Eastern’s West Louisiana pool for whatever reason, saying it seemed more likely that the East Louisiana pool would have suffered more from shut-in losses.
The marketer said he already had received a notice of a force majeure shut-in related to Dennis from one producer. That seemed kind of premature to him with Dennis not being expected to reach the Gulf of Mexico until early Saturday. He expected prices to rise again Thursday, noting Wednesday’s energy futures spikes and the fact that “people will be worried about Dennis.” Dennis could become a “monster,” he commented, but then again it could wipe out over Cuba and be a nonevent.
A Northeast utility buyer said he didn’t see any nominations cuts in Gulf Coast baseload from Cindy, but he wasn’t buying any new spot gas Wednesday because of high prices. He admitted that he hadn’t expected to see $8-plus delivered prices in the Northeast again so soon, commenting, “That kind of market is crazy.” His company plans to be more than half full in its storage accounts by the end of July, “so we’ll be in good shape with three full months of injection season still left.”
The National Weather Service predicts above normal temperatures during the July 11-15 workweek in all of the Northeast and Upper Plains, nearly all of the Midwest (excepting the region’s southern fringe), and virtually all of the West except for New Mexico and the southeastern half of Colorado. It predicted below normal readings everywhere south and east of a line running northward through central New Mexico before curving eastward through Kansas to the East Coast border between Virginia and North Carolina.
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