Prices fell further at a large majority of locations Friday as it appeared that a tropical storm heading toward Texas would spare most offshore production and heat forecasts weren’t strong enough to avert market softness. Even the lack of a weekend industrial load loss in Friday’s trading was unable to support pricing.
Most drops were in double digits as they ranged from 2-3 cents to about 40 cents. With relatively moderate weekend temperatures due in New York City, Transco Zone 6-New York led the overall downturn. Nearly all of the flat to about a dime higher performances occurred in the Rockies.
Futures continued to provide negative guidance for Monday’s cash market as they fell another 9.9 cents (see related story).
Because of August starting Monday, Friday’s trading was for that day only. Flows through Sunday had been covered in Thursday’s deals.
Tropical Storm Don was getting close to making landfall either late Friday or early Saturday along the South Texas coast in the general vicinity of Corpus Christi, according to the National Hurricane Center (NHC). As of 1 p.m. CDT Don was about 145 miles southeast of Corpus Christi and 120 miles east-northeast of Brownsville, packing maximum sustained winds of 50 mph. Don was not expected to reach hurricane status.
The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) updated offshore shut-in statistics related to the storm, saying they had more than doubled from Thursday’s report of 148 MMcf/d to 327 MMcf/d Friday, or about 6.2% of normal Gulf of Mexico production. BOEM said reports it had received by 11:30 a.m. CDT indicated that personnel had been evacuated from 56 production platforms and four drilling rigs. About 11.9% of the Gulf’s oil production was shut in, the agency added.
Much farther out to sea, the NHC also was monitoring a large tropical wave about 1,150 miles east-southeast of the Lesser Antilles, which it gave a 30% chance of becoming a tropical cyclone within the following 48 hours.
Highs were due to remain hot in the 90s and occasionally the low to mid 100s from the Mid-Atlantic and South Atlantic coast through the desert Southwest through the weekend. But while warming slightly, the Midwest and Northeast could expect peak temperatures from only the mid 80s to either side of 90. The Rockies also were in a warming trend, with low 90s forecasts for Denver helping to explain why that area tended to have most of Friday’s flat to slightly higher prices.
Hot forecasts for its Florida market area prompted Florida Gas Transmission to issue an Overage Alert Day (see Transportation Notes). However, that did not prevent production-area quotes into the pipeline from participating in the overall Gulf Coast softness, with Florida Gas Zone 3 pricing down about a dime.
A bulletin board posting by Northern Natural Gas noted the relative warmth of the Upper Midwest these days, saying that while its normal system-weighted temperature is 73 degrees at this time of year, it was anticipating averages of 80, 80 and 82 for Saturday, Sunday and Monday, respectively.
Barclays Capital analysts observed that just five years ago the current tropical storm situation would likely have prompted a price rally “as the market tended to pay a strong premium for the uncertainty of potential supply disruptions caused by hurricanes in the Gulf of Mexico (GOM).” But this fear has recently quelled because increased hurricane activity has not necessarily meant landfall, they said, nor has it necessarily equated to disrupted gas production, adding, “In fact, while 2010 did feature above-normal hurricane activity as predicted, there was a minimal effect on the natural gas market.”
In addition, the GOM has been losing its weight in U.S. supply over the past few years as its output has dropped from 13.8 Bcf/d in 2001 to 5.5 Bcf/d this year, the analysts continued. “Threats to the Gulf Coast could still bring support to prices, but unless a storm’s destructive force proves to have a long-lasting effect on a significant amount of production, any support is likely to be muted and short-lived.”
IntercontinentalExchange had nothing to report in bidweek-ending trading other than a hefty 172,000 MMBtu of NOVA Inventory Transfer gas changing hands at an average C$3.29, down a little more than 3 cents from the previous day.
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