The cash market shrugged off what normally would have been a bullish development — hurricane-related offshore shut-ins — and softened in Wednesday’s trading for the first day of July. Quotes were down anywhere from a little less than a nickel to about 30 cents.

Heat levels that have moderated substantially in the last couple of days, especially in key market areas such as the Northeast and Midwest, along with the 18.5-cent drop Tuesday by the August futures contract in its prompt-month debut, were largely responsible for the storm’s inability to strengthen prices. Also, the rapid increase of onshore production from shale plays in recent years has greatly blunted the usual impact of offshore outages.

It looked like prior-day futures guidance for the physical market would continue for a while early Wednesday morning as futures were down a bit initially, but they rallied to finish the day 6.8 cents higher (see related story).

Northwest and Southern were among pipelines cautioning shippers against trying to bank gas on their systems during the Fourth of July weekend, noting that this period is typically one of the lowest-demand periods of the year. Southern said forecasts called for cooler temperatures in its normally torrid market area (at least during the summer), and it expected storage injection requirements to exceed its maximum capability in the holiday period.

The first hurricane of the 2010 Atlantic season, Alex, was expected to make landfall sometime late Wednesday night or early Thursday morning in northeastern Mexico, according to the National Hurricane Center (NHC). Its confidence in Alex landing south of the Texas border was growing late Wednesday afternoon. The storm was causing only a relatively minor amount of gas production shut-ins in the Gulf of Mexico (GOM).

The Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE) said that as of 11:30 CDT Wednesday, 31 companies had reported 919 MMcf/d in shut-ins, or 14.36% of normal GOM gas output, to it. The outages were up from the BOEMRE report of 600 MMcf/d a day earlier.

BOEMRE, which used to be known as Minerals Management Service, emphasized that shut-in information in its reports “is based on what the operator expected to produce that day. The shut-in production figures therefore are estimates, which the BOEMRE compares to historical production reports to ensure [that] the estimates follow a logical pattern.”

The agency also said 74 oil and gas production platforms and eight mobile drilling rigs had been evacuated by midday Wednesday.

Alex had gotten a little stronger and its speed had increased moderately as it was about 80 miles northeast of La Pesca, Mexico and about 105 miles south-southeast of Brownsville, TX, as of 4 p.m. Wednesday, NHC said. Its maximum sustained winds had reached 90 mph, but it was moving westward at about 13 mph, NHC added, which would tend to keep the storm farther away from U.S. GOM production facilities.

Hurricane warnings were in effect for the Texas and Mexico coasts from south of Baffin Bay to the mouth of the Rio Grande and from the mouth of the Rio Grande to La Cruz, respectively.

A Texas marketer said Alex was not a price-boosting factor primarily because the offshore South Texas area is just not as big a gas production area as much of the rest of the Gulf of Mexico. He said the Midwest cooling trend that tended to depress spot prices cooling won’t last forever; Chicago-area temperatures are expected to get up around 90 this weekend, which is five degrees above normal, he said. Also, hot weather in the Midwest has more impact on gas prices than comparable highs in the South, he said.

The marketer estimated the Chicago index for July in the $4.74 area. However, he added, bidweek prices fell substantially as trading proceeding, reporting that the Chicago citygate was trading around the mid $4.40s in the limited-volume last day of baseload deals Wednesday.

It was cool Wednesday in the Upper Midwest but should be getting quite a bit warmer by the weekend, a regional marketer said. She reported Consumers Energy delivered numbers down about 18 cents in daily pricing for July 1.

Her company bought July baseload gas at basis of plus 15 cents at Consumers Energy and plus 19 cents at MichCon, the marketer said.

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