Tuesday’s market was largely an extension of the one that started the week: quotes a bit softer at most locations but a few flat to slightly higher points keeping movement mixed overall. Even as restoration efforts get into high gear along the East Coast following Hurricane Irene’s damage, the overall weather outlook is too moderate to be supportive of gas prices.

Numbers that were flat to about a nickel higher were most common in the Gulf Coast, Midcontinent/Midwest and Western Canada. Losses ranged from 2-3 cents to nearly 15 cents.

The expiration-day loss of 7.4 cents by September futures was a bearish note for Tuesday’s cash trading, but the October contract launched its prompt-month with an increase of 7.9 cents (see related story), which will help support the physical market Wednesday.

Tropical Storm Jose had already disappeared from the National Hurricane Center’s (NHC) Atlantic tracking map by Tuesday morning, but it was quickly succeeded by the development of Tropical Storm Katia in the southeast Atlantic. Although one forecasting service said it expects Katia to remain an open-ocean system, Katia may have a chance to become the first storm to affect Gulf of Mexico (GOM) production this year since Hurricane Don. Although Katia would be crossing open waters for the next few days from its midday Tuesday position about 630 miles west-southwest of the southernmost Cape Verde Islands, barring any radical change in course its west-northwestward movement would eventually carry it to the north of Puerto Rico.

NHC expected Katia to be nearing hurricane strength by late Wednesday or early Thursday.

Later Tuesday the agency began monitoring a tropical wave over the northwestern Caribbean Sea that was considered much more likely to make it into the GOM. The wave was moving generally westward at 10-15 mph and was likely to cross Mexico’s Yucatan Peninsula during the next day or two, NHC said. It gave the system a 10% chance of becoming a tropical cyclone within the succeeding 48 hours.

Weatherbell Analytics chief meteorologist Joe Bastardi had little doubt that the wave will become Tropical Storm Lee and target the western and central Gulf Coast. “When this system gets into the Gulf of Mexico in a few days, it’s likely that we’re going to see a slow-moving tropical storm or hurricane develop, which is likely to threaten the Texas or Louisiana coast for Labor Day weekend. It could also disrupt Gulf energy production for a few days as well,” Bastardi said.

Though Tennessee still had an Imbalance Warning in effect Tuesday for market-area Zones 4, 5 and 6, no other pipes serving the Northeast or Mid-Atlantic were believed to have any Irene-related restrictions in effect.

Gas demand losses associated with power outages caused by Hurricane Irene may recover more quickly than expected. Con Edison reported Tuesday morning that its crews had restored electric service to approximately 150,100 of the 187,800 customers (about 80%) in its New York City and Westchester County service area that lost power as a result of the storm. For the electric latest outage numbers updated every 15 minutes, set the www.coned.com/outagemap website.

On the other hand, one analyst said several of the East Coast nuclear plants that were either shut down as a precautionary measure or tripped offline during the storm have already begun to ramp up again. Thus the window of opportunity for gas to displace some of the nuclear generation share may be fleeting.

Very slight warming trends are developing in the Midwest and Northeast, but with Wednesday highs still capped at about 80 into the mid 80s at most locations, any near-imperceptible increase in cooling load was unlikely to support a substantive market rally.

The South remains warm but still on the moderate side with few peak temperatures surpassing either side of 90. And although Oklahoma and much of Texas through parts of Arizona will still be subject to highs around 100 or greater for a while longer, Houston and southeast Texas in general will start cooling Wednesday to match most of the South in the 90 vicinity Thursday through Saturday. There may even be a few rainstorms to partially relieve the severe drought around the Houston area. Katy Hub and Houston Ship Channel prices fell about a nickel and nearly a dime Tuesday, respectively.

The Rockies and inland California also are adding a bit of heat to that in the desert Southwest, but moderate conditions dominate most of the West.

Florida Gas Transmission ended an Overage Alert Day after a three-day run (see Transportation Notes), and production-area quotes into the pipeline were down a couple of cents in Zone 1, nearly a dime in Zone 2 and nearly 15 cents in Zone 3.

Northern Natural Gas indicated an abrupt reversal of its projection that a system-weighted average temperature around 70 Monday and Tuesday would be jumping to about 80 Thursday (see Daily GPI, Aug. 30). On Tuesday a bulletin board posting said the average was expected to retreat by a similar amount to the lower 70s Friday.

A Midwest marketer also said she was seeing forecasts of a “very short-lived warmup” in her region nearing the weekend following pleasant conditions to open the week. She reported buying September baseload at last-day settlement basis of plus 23.5 cents into Consumers Energy and plus 24 cents into MichCon.

IntercontinentalExchange (ICE) indicated bidweek activity tailing off considerably on its platform Tuesday, which wasn’t surprising considering the day-earlier expiration of September futures. A previous declining trend in bidweek quotes was slowing to a near-halt in lighter activity as ICE reported El Paso-Permian averages almost unchanged around $3.77 from Monday to Tuesday. The PG&E citygate even rallied by about 7 cents to nearly $4.23, ICE said.

The National Weather Service predicts the upcoming Sunday-Thursday period will have above-normal temperatures in nearly all the western half of the U.S. along with the southeast corner south and east of a line from northeastern South Carolina to near the western tip of Florida’s Panhandle. Below-normal readings are most likely from Arkansas and eastern Oklahoma through much of the Midwest and into the southwestern section of the Northeast.

Stephen Smith of Stephen Smith Energy Associates said Tuesday he left unchanged his original estimate of a 60 Bcf storage injection for the week ending Aug. 26. Credit Suisse’s Stefan Revielle looks for a noticeably lower volume of 55 Bcf.

Meanwhile, Citi Futures Perspective analyst Tim Evans had a significantly higher projection of 66 Bcf for Thursday’s report by the Energy Information Administration. Evans also said he anticipates a minimally larger injection of 68 Bcf for the week ending Sept. 2, to be followed by the season’s first triple-digit builds of 100 Bcf and 104 Bcf for the weeks ending Sept. 9 and Sept. 16, respectively.

Canaccord Genuity analysts said although temperatures in the central U.S. are likely to remain three to four degrees above normal over the next several days, longer-dated weather models “suggest moderating conditions starting next week, which should depress temperatures to near seasonal norms.” For that reason, although it did not specify a volume, the Canaccord Genuity team also thinks the industry “may have a shot” at a triple-digit storage addition for the week ending Sept. 9.

©Copyright 2011Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.