Cash quotes continued to fall Tuesday, but the declines were notably smaller than on the day before. The slide was remarkably consistent across all geographic areas with nearly every point down between a nickel and about a dime; only a few in the Gulf Coast and Midcontinent/Midwest fell by as much as 13-19 cents.

While hot weather continues to dominate in the southern half of the U.S., key market areas in the Midwest and Northeast will see falling temperatures Wednesday as the effect of either a cold front (Midwest) or extensive thunderstorm activity (Northeast). High temperatures are unlikely to go higher than the 70s in the northern Plains and Great Lakes areas, according to The Weather Channel, and “a few spots might not even struggle out of the 60s.”

Despite fading weather support, however, tropical activity and yet another oil price record could be the catalyst for a moderate rally in cash gas numbers coming as early as Wednesday, a couple of sources said. That phrase that’s so popular in the industry, especially among end-users and utilities — “storm hype” — could be getting a workout soon, one said.

While newly christened Hurricane Alex continued to move northeastward away from North Carolina’s Outer Banks islands, something of more immediate interest to the gas market was the formation of Tropical Depression Two (TD2) east of the Lesser Antilles (the chain of small islands between Puerto Rico and Venezuela). As of 6 p.m. EDT Tuesday, what the National Hurricane Center called the “poorly defined center” of TD2 was about 300 miles east of the Windward Islands (lower half of the Lesser Antilles) and heading west at nearly 23 mph. Tropical storm conditions were expected within 24 hours in portions of the Lesser Antilles north of St. Lucia, the NHC said.

TD2 should be classifed as Tropical Storm Bonnie within the next 12-24 hours, the Weather 2000 consulting firm said in a Tuesday morning advisory. “Right when people were about to dig the grave of the 2004 Atlantic hurricane season, foolishly before the active three months even started, we now have activity galore in most major basins. The next disturbance on our plate [TD2] is a more classic Cape Verde tropical wave, which emerged off of Africa late last week…This system has an ample ‘runway’ of warm, tropical Atlantic waters for it to do its thing and steadily organize and strengthen. According to our research, symmetry, outflow, convection and size all look healthy as it treks toward the Windward Islands of the Caribbean, below 15° N. latitude. Although it is far too early to speculate on potential U.S. strikes, and statistically the most likely course is a swing toward the Sargasso Sea or Bermuda, soon-to-be Bonnie does not have to do any bizarre turns or curvatures to bring Florida or even the Gulf within its path sights down the road, so stay tuned.”

And while the natural gas screened eked out a bare 0.3-cent gain Tuesday, crude oil futures established yet another all-time high, settling up 33 cents to $44.15/bbl as traders found it impossible to dismiss persistent worries about future supply. While “skyrocketing” might not be the right adjective for oil’s rise, one source said, the current stratospheric levels tend to magnify the significance of even moderate gains.

A Gulf Coast marketer noted that the Atlantic tropics are “still way behind for what was predicted to be an overactive hurricane season.” He said a friend with a time-share condo on a Caribbean island had reported that the ocean waters were already “midsummer warm” as early as the end of April, which means that conditions are very conducive for strong tropical storms and hurricanes this year.

The marketer went on to say he found it interesting that oil futures could keep reaching new record heights while the gas screen “is still struggling.” The main transport issue in the Gulf Coast currently is the Toca I processing plant constraint (see Daily GPI, Aug. 3); supplier behind the plant on Sonat said he’s been lucky in not having any volumes cut yet, emphasising the “yet”

A producer said none of his company’s trading counterparties were “really talking yet” about TD2 because it was still too far out to break a sweat over. However, he saw it taking on more significance and providing a good chance of rising prices Wednesday or later this week, because its heading could easily it into the Gulf. He noted that as an offshore producer, the company wouldn’t care for any price run-up TD2 might cause because that also meant some production would have to shut in some production.

Tuesday’s new oil price record could help to relink gas and oil futures movement, the producer said. He noted that Transco Zone 6-NYC and Texas Eastern M-3 were at least 50 cents or more above Henry Hub Tuesday, easily covering transport variable costs. Gulf points started 15-20 cents down from the screen, but came up almost even with futures screen late (while the September gas contract was still slightly negative), he noted.

The National Weather Service forecast for the Aug. 9-13 workweek calls for above normal temperatures in Maine and almost everywhere west of a line from the eastern edge of Wisconsin to Louisiana’s western border. Below normal readings are expected in the southern halves of Mississippi and Alabama and in all the East Coast states from Pennsylvania through Florida. NWS also expects below normal temperatures in a sliver of land along California’s border with Mexico.

Citigroup analyst Kyle Cooper’s final estimation for the upcoming storage report looks for a build between 78 and 88 Bcf. “For inventories to eliminate the surplus to last year, injections must fall 16 Bcf per week below last year,” he said. “For this week, that means the injection must be 60 Bcf or lower. We obviously do not believe that will happen.”

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