Cash prices continued to soften at most points in Friday’s launch of the September aftermarket even as the pace of Gulf of Mexico (GOM) shut-ins and evacuations quickened. The previous day’s 55.8-cent plunge by futures, generally moderate weather forecasts outside the Southwest and much of the South, the holiday loss of industrial load and a highly bearish storage report a day earlier apparently mattered more to cash traders than the accelerating offshore production losses.
Friday afternoon Tropical Storm Gustav turned back into Hurricane Gustav, according to a 3:15 p.m. EDT advisory from the National Hurricane Center (NHC). Data from a reconnaissance aircraft indicated that maximum wind speeds of Gustav were near 75 mph.
Most of the market fell between 2-3 cents and nearly 65 cents, with the Houston Ship Channel — which had been a rare firmer point Thursday — and El Paso’s San Juan-Blanco pool taking the biggest price hits. Several points, primarily in the Rockies and Northeast, kept mixed price movement in play by ranging from flat to about $1.15 higher.
The Rockies market saw most of the largest upticks. It was gaining a little cooling load with Denver expecting a high in the low 90s Saturday, but prices there are expected to plunge Tuesday as the producer-dreaded Rockies Express segment outage begins the next day and backs up an estimated 600-800 MMcf/d into the region until nearly the end of September.
Minerals Management Service (MMS) said 13 companies reported shut-ins of 136 MMcf/d of gas and 86,013 b/d of oil in the GOM. That represented about 1.84% and 6.62%, respectively, of the Gulf’s current estimated production of 7 Bcf/d and 1.3 million b/d, MMS said. It also said evacuations of six platforms and 17 mobile drilling rigs had been reported.
The agency only takes such reports through 11:30 a.m. CDT. It was virtually a certainty that the shut-in and evacuation statistics would get much larger by Friday night.
A Gulf Coast trader said prices had tried to move higher at first and then retreated for a while before getting a second wind from a moderate rally by the October futures contract after its 55.8-cent plunge a day earlier. Shortly after noon EDT the contract was up 12 cents to $8.170; however, the increase later evaporated and October ended the day down 10.7 cents.
At mid-morning Henry Hub had last traded at $8.22, which was down about 14 cents from Thursday’s average but at the high end of Friday’s range up to that point, the trader said. Despite the softness, she reported finding “lots of market out there,” especially in North Louisiana, as buyers sourced more gas there due to fears of production losses offshore and in South Louisiana early next week. They were looking for “hurricane-proof” supplies, she said.
She noted that falling prices Thursday and Friday weren’t reflecting normal concerns over a hurricane in the Gulf of Mexico, but said that was mainly due to the much larger than expected storage injection reported Thursday.
Due to the transition to a new month over the long holiday weekend, spot gas was traded Friday for Monday-Tuesday flows.
Noting forecasts that Gustav will make landfall as a major hurricane somewhere along the central Gulf Coast early next week, Sabine Pipe Line said Friday its system and operations may be directly impacted. “Based on the information we have today, Sabine could begin shutting down pipeline operations as early as Sunday morning,” the pipeline said. “We encourage all facilities and shippers on Sabine’s system to begin making preparations for a shutdown” by that time. Sabine is the operator of Henry Hub, on which Nymex bases its natural gas futures contract.
Citing the anticipated impact of Gustav, Tennessee said it would require producers to shut in by 6 a.m. CDT Sunday in the following areas: upstream of the Grand Chenier, Sabine and Johnson Bayou processing plants and on the West and Southwest Legs of the Blue Water system upstream of the Pecan Island Processing Plant. Tennessee also reported late Friday that operator Targa Midstream Services had indicated that the Yscloskey plant would be shutting in that evening so it could be secured in anticipation of Gustav. “At this time, Tennessee Gas Pipeline will not require those meters located upstream of the Yscloskey plant to shut in their production,” it added. (See Transportation Notes for other Gustav-related impacts.)
After clearing the island of Jamaica, Gustav was poised to strengthen over the northwestern Caribbean Sea Friday, NHC said. The storm would pass near or over the Cayman Islands later in the day, over the western portions of Cuba Saturday and into the southern Gulf of Mexico Sunday, the agency said. NHC still projected a most-likely landfall in the vicinity of Terrebonne Parish on Louisiana’s central coast but had moved it slightly westward to the parish’s western edge.
At 5 p.m. EDT Gustav’s center was about 100 miles east of Grand Cayman and about 380 miles east-southeast of the western tip of Cuba, NHC said. It had accelerated a bit and was moving toward the west-northwest at about 12 mph with a turn to the northwest expected later Friday. Gustav could become a major hurricane near the time it crosses western Cuba, NHC said.
Tropical Storm Hanna’s projected path was growing a bit more ominous for offshore operators. Hanna was passing well north of the Virgin Islands Friday afternoon, but NHC expected a turn to the southwest beginning Sunday that would take the storm through the Bahamas and in the direction of Cuba. At 5 p.m. AST the center of Hanna was about 280 miles north-northeast of San Juan, Puerto Rico, and about 450 miles east of Grand Turk Island. It was moving toward the west-northwest at about 10 mph and had maximum sustained winds of nearly 50 mph.
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