The earliest-ever formation of a fifth named storm in an Atlantic hurricane season in more than a century of record keeping, abetted by gradual increases in heat levels in some areas, was responsible for large price gains at all points Tuesday.

No one market region stood out from the others as upticks ranging from about a quarter to more than half a dollar were fairly evenly mixed.

Sources expected the cash bull market to keep running Wednesday after energy futures mirrored the cash strength with major spikes of their own. The natural gas screen soared 39 cents to $7.885, although traders noted that at settlement it had retreated a little more than 20 cents from the intraday high of $8.10. And Nymex’s petroleum-based offerings also had strong days, with crude oil for August delivery temporarily trading above $61/bbl before settling at $60.62, up $1.70.

With its projected path eerily close to that of Hurricane Dennis, Tropical Depression Five was upgraded to Tropical Storm Emily for packing maximum sustained winds of nearly 50 mph. The National Hurricane Center (NHC) said Emily had the potential to become a hurricane before reaching the Windward Islands. At 5 p.m. AST the storm’s center was about 475 miles east-southeast of one of the islands, Barbados, and was moving westward at almost 20 mph. NHC said a turn to the west-northwest was expected in the next 24 hours, and based on its tracking forecast, the center of Emily would be reaching the Windward Islands late Wednesday.

Meanwhile, Dennis-related shut-ins in the Gulf of Mexico (GOM) saw big declines but were still very large. Minerals Management Service (MMS) said 4,297.1 MMcf/d of gas (down from 6,236.6 MMcf/d Monday) and 857,975 bbl/d of oil (down from 1,443,655.3 bbl/d) remained offline Tuesday, based on reports from 55 companies received by 11:30 a.m. CDT. Sixty-four platforms and 25 drilling rigs were still evacuated, MMS said. Cumulative deferred gas production from last Friday through Tuesday totaled 22.4 Bcf, or 0.6% of the Gulf’s normal annual output.

The process of restoring GOM flows and assessing damage caused by Dennis continued. Apache Corp. said it has restored “essentially all” of its pre-storm Gulf production of about 650 MMcf/d of gas and 65,000 bbl/d of liquid hydrocarbons. By noon last Saturday, Apache had shut in approximately 70% of its offshore gas and almost all of its oil.

So far the most significant damage associated with from Dennis appears to be BP’s Thunder Horse floating production platform (see related story), which was found to be listing 20-30 degrees. It was not in production yet, but was slated to begin providing 200 MMcf/d of gas and 250,000 bbl/d of oil later this year. Analysts agreed that the Thunder Horse situation likely helped spur the Nymex run-ups by re-igniting future supply worries, since the project was slated to be the next major addition to total U.S. energy supplies.

The slow-moving remnants of Dennis were expected to keep cooling off the lower Ohio Valley and parts of the Mid-South Wednesday. However, temperatures were creeping higher in other parts of the South, and what The Weather Channel (TWC) called “blistering heat” was slated to occupy much of the West Wednesday. Heat advisories are posted for parts of the desert Southwest, and 100-degree-plus highs are due in California’s Central Valley, much of the Great Basin and eastern Montana, TWC said.

“Pretty much Emily was it” as Tuesday’s big price booster, a Houston-based marketer said. It may be a few days before Emily gets within striking range of the Gulf, but people are buying extra gas now, presumably to put into storage, so it will be available during the next hurricane-inspired GOM production outages, he said. In the Midwest, heat in Minnesota was keeping Northern Natural’s demarc and Ventura points strong, but the weather is kind of mild in Chicago, he noted.

The marketer also commented on one other bullish factor that he and colleagues were discussing: A little bit of pessimism on storage may be creeping into market psychology. The industry may not have quite as strong an outlook for high storage levels as earlier believed, he explained. Between the earlier than normal surge in tropical storms that are cutting offshore volumes and the hotter weather that can be expected through July and August, current surpluses are going to disappear if the industry doesn’t keep adding large amounts to storage each week, he said.

Emily was the obvious explanation for Tuesday’s higher prices, a Gulf Coast marketer said, but he couldn’t tell how much of a part hotter weather played. The screen strength sent late cash numbers higher and will provide residual support for Wednesday’s spot prices, he said. “We were very busy today getting offshore production restored,” he added. It’s being turned back on in small amounts here and there, the marketer said, but his company hopes to have everything back sometime Wednesday. He said he only traded at places Tuesday where he was assured of having confirmed onshore supplies available Wednesday.

The National Weather Service predicted above normal temperatures for the Northeast, Mid-Atlantic and most of the Midwest during the July 18-22 workweek. It also looks for above normal readings everywhere west of a line curving from southeast Texas northwestward through western Montana. The only area where below normal conditions are forecast was in Georgia, Alabama and the Florida Panhandle.

Enercast is predicting a storage injection of 90 Bcf to be reported Thursday, while Citigroup’s Kyle Cooper said his final estimation is for a build of 81-91 Bcf.

©Copyright 2005Intelligence 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.