There was a feeding frenzy in the Gulf Coast region early onFriday, and we’re not talking about Hammerhead sharks. Tropicaldepression 11 triggered panic buying at the opening gate, sendingprices soaring 15-25 cents at most locations east of the Rockies.

But cool autumn weather apparently calmed the crowd, and a latesell-off ensued. Gains for the day still averaged in the high-teensnearly across the board, except for points in the Rockies andCalifornia, where prices were flat to down a dime.

“Everybody piled in on the front and bought,” said one GulfCoast region trader. “Some sellers thought ‘well the price is goingto be even higher later on in the session,’ and they waited andheld their supplies off. But there were no buyers left at the end.To compound the problem, there was excess market-area supply. Thisis autumn, so there’s no cooling load. To encourage buyers to takeit off their hands, the utilities were out selling below variablecost. Then all of a sudden, the people who were able to buy cheaperin the market area, needed to sell their supply-area gas. Therewere no buyers at the end, and there were new sellers so we createdsome pretty ugly ranges today by the lows being developed at theend from distress gas being dumped off. We were as low as $5.23 atthe Henry Hub and as high as $5.33.”

High temperatures in the Northeast on Friday were expected to be10-25 degrees cooler. Lows in the upper Midwest dipped into the low30s, and the South also felt the beginning of autumn. The weekendwas expected to bring more of the same. And the National WeatherService’s latest six- to 10-day forecast shows a broad swath ofbelow normal temperatures over the Midwest and Northeast, withabove normal temperatures expected over the West and over Florida.

“The amount of excess supply that autumn temperatures put backin the supply area ought to remind people that we are about toenter a very poor demand period,” said one Northeast marketer.”That’s why they call them shoulder months.

“I think the eastern market area storage is very comfortable,”he added. “Everyone we’ve talked to up there said they felt likethey’ve been very structured over the last seven to nine weeks ofputting gas in. I did not hear any panic from any utility up in theNortheast about storage. All the shorts in the AGA survey arebasically in the producing region.”

That view was confirmed by at least one large Northeast LDC. “Asfar as we’re concerned storage is fine,” she said. “We’re right ontarget. We left some for day-to-day purchases this month justbecause we weren’t sure what the weather was going to do. Thecooler it gets, the more we can take to top off storage. We’re notbehind at all. We’ve been ahead almost the entire summer. We sloweddown a little on purpose. The pipeline is saying that most storageaccounts are where they should be.”

The American Gas Association reported a 72 Bcf injection intostorage last week and said working gas levels were 244 Bcf lowerthan the five-year average for the same week. At 1,344 Bcf, workinggas levels in the Eastern Consuming region are 112 Bcf (8%) behindthe five year average and 138 Bcf lower than levels at the sametime last year. In the Producing Region, working gas levels are at549 Bcf, which is 131 Bcf (19%) less than the five-year average and233 Bcf less than levels at the same time last year. The WesternConsuming region is only 1 Bcf behind the five-year average and 39Bcf behind levels last year.

Until last week’s report, storage injections had been running15-20% below average, which is part of the reason many marketstakeholders were so quick to push the panic button early Fridaywhen the National Hurricane Center (NHC) sent up a red flag in theGulf of Mexico. A hurricane in the Gulf could significantly hinderthe industry’s ability to store gas for several days. By Fridayafternoon, the NHC had grown serious about the possibility ofTropical Depression 11 becoming a tropical storm and continuing tostrengthen.

“The depression is gradually becoming better organized and is onthe verge of becoming a tropical storm,” the NHC said Friday at 4p.m. (EST). “There is no doubt that the system looks impressive onsatellite imagery. …[I]t is expected that eventually the systemwill become vertically aligned and strengthening will begin. Thefuture track is highly uncertain. Most of the track guidance showsa general north-northwest to northerly track but it is hard toignore the GFDL which consistently — for the past two runs —has turned the tropical cyclone toward the northeast toward theFlorida Peninsula.”

If the storm fizzles, prices are likely to come off hard,according to one observer. “Who’s going to sell hard in front of astorm?” he asked. “We had a sell-off late Friday, but it wasn’tmuch of one. We’re going to settle better than unchanged. The otherthing you can’t take for granted is we’re setting new contracthighs everyday. This is really a goosey area. This market is set upfor a 50- to 60-cent drop. I think the stars have to line up right.I also think you have to have clear weather situation where thereare impending hurricanes coming up and the reinforcement of theautumn-like temperatures.

“All bets are off if we get a hurricane. It could be prettydevastating. We could have 4-6 Bcf/d off for five to seven days andthis market would be set up to go even higher.”

“I think prices will be up or down 25 cents on Monday,” saidanother observer. “Producers are on standby; they’re exchangingphone numbers with traders. There’s a lot of hype about this storm,but I don’t think it’s because it’s looking that bad. I think it’sthe first born of the season and is getting all the attention. Ourmeteorologist said that once the storm gets across the Yucatan andhits the Gulf it’s going to end up being nothing major. Right nowit’s just hanging out there and scaring people.”

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