Spot gas prices were sharply higher on Monday as 2.9 Bcf/d of Gulf of Mexico gas production remained shut in, according to the latest report from the Minerals Management Service (MMS). Several gas processing plants remained down and some Gulf pipelines, particularly Southern Natural and Tennessee Gas, continued to have difficulty returning to normal flows because of damage suffered during Hurricane Ivan.

Cash prices rose 25-45 cents on average across the country, and near-month futures were up 14.1 cents to $5.249 on lingering damage reports and continuing tropical activity in the Atlantic. There are two tropical storms and one hurricane in the Atlantic, but all appear headed away from the Gulf of Mexico. Only Tropical Storm Lisa would have a remote chance of making it to the Gulf.

Even western spot points joined in the overall price strength on Monday with many locations, including Southern California Border, Sumas, Opal and the PG&E Citygate up more than 40 cents. Gulf points were among the smallest gainers compared to Friday’s levels (except for volatile Florida Gas Zone 3), but were rapidly closing in on the screen. Henry Hub even moved into positive territory for awhile compared to October futures. The Hub averaged in the low $5.20s.

“Processing plants are having trouble getting back into service, so even when we get our supply and other problems cleaned up there is something else to dodge,” said a Gulf producer. “The Toca and Venice processing plants are down. Venice is supposed to come up today and Toca is supposed to be up tomorrow. A lot of those things weren’t known until later on in the daily cycle so gas couldn’t be scheduled. The unknowns are still driving things crazy. Until that clears up, you’ll probably see continuing strength in prices.”

Enterprise Products Partners reported reduced volumes at seven Gulf Coast processing plants. Those plants east of the Mississippi River, including Toca, Venice, Yscloskey and Pascagoula, have been affected the most. But Neptune, Calumet and Sea Robin also have been receiving lower than normal gas flows, an Enterprise spokesman said.

The MMS reported that 32 production platforms and two rigs were still evacuated as of 11:30 a.m. CDT Monday. A total of 699,214 bbl/d of oil and 2,895 MMcf/d of gas remained shut in. Cumulative shut-ins totaled 33.33 Bcf of gas and 7.8 million bbl of oil.

MMS also said that the latest Gulf of Mexico assessment found four platforms missing and presumed sunk, another with extensive topside damage, and one leaning. In addition one rig was missing that was on a spar, one spar with extensive topside damage, three pipeline leaks and a variety of other damages. Murphy Oil said it could take five weeks to repair the rig on the Medusa platform, which was producing about 40 MMcf/d.

Southern Natural appeared to be the worst affected by the hurricane, but Tennessee was coming in a close second. Southern’s Olga compressor station was down and in need of repairs. Southern also lost Main Pass platform 293 and suffered damage to Main Pass 298. A Southern spokesman said a 20-inch diameter line also was being inspected for possible damage. About 70 gas supply meters upstream of the Toca Compressor station were shut in last week and about 40% were still shut Monday, affecting more than 300 MMcf/d of gas supply.

Meanwhile, Tennessee Gas said it found two leaks on the 26-inch diameter and 36-inch diameter lines of the Bluewater pipeline system, in which it shares ownership with Columbia. More than 320 MMcf/d of gas was affected Monday. Tennessee also was looking into a possible leak on its 30-inch diameter SP 77 pipeline. Bubbles were seen near a platform and an inspection team was sent out Monday, a spokesman said. The Bay Marchand gathering system remains shut down because of damage and all the receipt points it serves are shut in.

Tennessee also declared a force majeure event Monday for the South Pass 49 527A-1300 line because of damage caused by Hurricane Ivan. Four receipt points were affected and will remain shut-in until further notice.

“The pipes are still seeing a lot of reduced supply and this could continue through the week,” noted a Gulf Coast marketer. “The Hub was in the low $5.20s today, which was easily up a quarter from Friday. A lot of people don’t know if the gas is going to be there until it shows up. We had reports that some of our gas was going to be there over the weekend and it really wasn’t.”

Problems were compounded Monday for some East Texas buyers, who had to deal with tight supply and transportation as well as strong demand due to 90-degree heat. South Texas gas had been the savior for many buyers facing supply cuts after Hurricane Ivan, but that was being bought up quickly Monday. It was 97 degrees in Houston over the weekend and 92 degrees on Monday, which is quite a bit hotter than normal for this time of year. To make matters worse, the 1 Bcf/d Oasis Pipeline system was expected to be limited Tuesday because of a smart pig run, which severely cut gas transportation from Waha in West Texas to the Katy Hub in East Texas.

“A lot of utilities had to buy extra gas over the weekend for their loads today,” said a marketer Monday. “Demand has been pretty strong. Katy had been 22 cents behind the Nymex, but got all the way up to five cents behind the screen today. I’m not sure if everyone knows if all their gas is showing up. It’s causing a lot of problems and Texas has issues of its own for tomorrow’s flow with Oasis being down. Most of the other pipes are full so there’s not much spare capacity.” He said the Waha-to-Katy spread, which normally is 15-20 cents, moved out to more than 40 cents Monday.

A Northeastern local utility buyer said his baseload and term gas was still facing some cuts. “We’re just buying Niagara today. We thought we would have been back to normal already but it’s only gradually coming up. Tennessee is where we’ve been hit the hardest. Transco is all back. We’re down to a couple thousand decatherm. At the peak it was maybe 90,000 Dth/d.”

Despite the cuts, however, the Northeastern market areas may not have had to rely on storage very much because of the mild weather, the buyer said. “We weren’t making it up at all for a while and didn’t have to use our storage. As long as we weren’t withdrawing we weren’t too concerned about it. We were buying some market area gas if the price was reasonable. This time of the year, it’s not too hot or cold.”

Tim Evans a gas futures analyst with IFR Pegasus said he expects another large weekly injection despite the impact of the production shut-ins. Evans is predicting a 75-85 Bcf injection. He calculates the five-year average at 82 Bcf. “Market psychology aside, this would really amount to a neutral figure,” he said, “which we read as further confirmation that in its natural state this market would still be in a clear surplus, much as it was all summer. It may take a week or two for that to become widely apparent once more, but we think that where this market is headed.”

Kyle Cooper of Citigroup believes the hurricane had a much more significant impact on storage. His “very preliminary” forecast is for a 60 Bcf injection in this week’s EIA storage report, which would be quite bullish compared to the 100 Bcf injection during the same week last year. However, Cooper apparently is a little bit nervous about his bold prediction, noting that Ivan also triggered some demand losses last week, which may have freed up any remaining supply for storage injections. “Ivan was clearly bullish on a net supply/demand basis,” said Cooper. “But some demand was also clearly lost and this somewhat tempers the lost supply.”

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