Thursday’s hint that major weakness in spot prices could be in store played out in spades Friday. Plunges of close to half a dollar were common as the cash market bowed under the oppression of what little weather load it could find fading away in several regions, a day-earlier screen dive that continued Friday, a bearish storage report, Thursday’s news of storage injection opportunities declining further, and of course the extra loss of industrial load during a long holiday weekend.

Overall losses ranged from about 35 cents to nearly 60 cents. Most of the biggest drops were clustered in the Northeast, while the smallest ones tended to occur in the Rockies/Pacific Northwest and Southwest basins.

Several western points, along with Southern Star Central (formerly Williams) in the Midcontinent, were being quoted below $4 for the first time since some points in the Midcontinent and South Texas averaged under $4 on the trade date of Nov. 21, 2003, which was the Friday preceding Thanksgiving.

The storage situation remained a highly negative influence on the market. A Northeast marketer reported that “we’re seeing the asset managers for utilities starting to manipulate their storage accounts.” That is, they’re taking some old gas back out to replace it with supply that has gotten a lot less expensive in the last couple of days, he explained. There will be some weekends coming up in September and October “that will be amazing” for how weak prices are because there will be so little storage capacity still left open, he said.

Hurricane Frances had weakened to a Category Three storm by Friday as it headed toward its rendezvous with Florida. A hurricane warning remained in effect for the state’s east coast from Florida City northward to Flagler Beach. At 5 p.m. EDT the center of Frances was about 90 miles east-southeast of Freeport, Grand Bahama Island and 200 miles east-southeast of Florida’s lower east coast, according to the National Hurricane Center.

Despite the market’s disbelief that Frances would have any effect on offshore production, a small amount of shut-ins was occurring Friday, according to the Minerals Management Service’s office in New Orleans. Only three companies reported to MMS, which said 20 MMcf/d of gas and 13,000 bbl/d of oil had been shut in. It also said nine platforms and five mobile drilling rigs had been evacuated.

Normally Florida Gas Transmission issues Overage Alert Day notices occasionally during the summer to combat low linepack. However, on Friday the pipeline said it was experiencing high linepack conditions and that decreases in demand were expected as a result of Hurricane Frances. “At this time FGT anticipates an Underage Alert Day may be required for the gas day of Saturday…to maintain pipeline system integrity and limit impacts to upstream suppliers,” it said. FGT had warned shippers earlier in the week to be prepared to make potentially drastic supply adjustments because of the nature in which hurricanes can affect load (see Daily GPI, Sept. 2).

As the 2004 Atlantic hurricane season continues to heat up after a quiet start, Tropical Depression Nine turned into Tropical Storm Ivan and was gradually strengthening, the NHC said. On Friday afternoon Ivan’s center was about 865 miles southwest of the Cape Verde Islands and moving toward the west-northwest at nearly 20 mph.

“I’m loving it,” a Midwest utility buyer said when asked his reaction to Friday’s price cratering. Finally prices are coming down to more reasonable levels, he went on, but added that he was realistic, though, “because they will start heading higher again around November or so.” He was in awe of the spread of about a buck and a half between the October and December futures contracts, asking, “Don’t you know there’s got to be some arbitrage opportunity there?”

A Chicago citygate trader said prices were at their lowest early on, and then he saw some recovery. “The citygate started out being offered 30 cents back of the October screen. That brought out some buyers who bid up prices a little, but then they faded away.” He expects mostly more softness through at least this week, saying the Chicago area “has no weather load to speak of.”

Along with Frances promising to bring a lot of cooling rain to the Southeast, cold fronts were due in the Midwest and much of the Northeast over the Labor Day weekend, The Weather Channel said. And although the Southwest and parts of California will be hot, “A new and very chilly Canadian air mass will spill southward over Montana and Wyoming Wednesday and Thursday with some snow for parts of Montana,” it added.

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