Thursday’s increased strength in the cash market proved to be a portent of Friday’s trading, in which prices were flat or higher at nearly all points. It appeared that the supply squeeze from continuing major Gulf of Mexico (GOM) shut-ins and the reduced access to Rockies gas caused by the near-month-long outage of a Rockies Express segment was getting tighter in eastern markets.
Friday quotes also had modest support from the previous day’s 5.8-cent rise by October futures. Negative factors were very little cooling load outside the southern tier of states and the usual weekend drop of industrial demand.
It’s beginning to feel like an early fall in much of the Northeast, Midwest and Upper Plains. Forecasts called for Saturday highs in the 60s and 70s in those regions, while overnight lows would be mostly in the 50s but some areas would get as chilly as the mid 40s near the Canadian border.
The restoration of shut-in offshore gas was picking up a little steam, with outages reported Friday to Minerals Management Service dropping to 5,907 MMcf/d, down 570 MMcf/d from the day before (see related story). That still represented about 79.8% of the Gulf of Mexico’s normal gas production of an estimated 7.4 Bcf/d.
The pace of GOM recovery likely would continue to accelerate during the weekend as more pipes were declaring themselves relatively damage-free and allowing resumed flows at various points. Processing plants without power in South Louisiana continued to be the chief barrier to restoring flows more quickly. However, some were starting to wonder if a change in Hurricane Ike’s expected path to one that looked considerably more ominous for offshore operators might have evacuations starting again this week.
Tropical Storm Hanna was nearing hurricane strength Friday and remained poised to create demand destruction in the South Atlantic and Mid-Atlantic areas during the weekend as it was expected to make landfall near the coastal South Carolina-North Carolina border either Friday night or early Saturday and continue up the East Coast. Power generation load was likely to drop both because Hanna’s winds would create electrical outages and its cooling rains would weaken air conditioning usage.
Through Thursday Ike was predicted to approach the southern Bahamas and then follow a route similar to Hanna’s along the East Coast. But on Friday the hurricane was looking more potentially threatening to offshore GOM production as the National Hurricane Center’s “five-day cone” of projected tracking showed Ike shooting the gap between Cuba and Florida and moving through the Florida Keys Tuesday afternoon.
Tropical Storm Josephine was still remote Friday and moving in a path that would take it toward the central East Coast.
A Calgary-based producer said it was earlier than usual for his area to get as chilly as it has been recently, with highs as low as the mid 50s last week. Calgary has even had local frosts already with nearby mountain snowfalls, he said. That portends a good skiing season, he noted. Whether it also portends a price-boosting cold winter remained up in the air.
The producer said he was not surprised by firmness in most of the market Friday. It likely resulted from “a little bit of squaring of positions” at the end of a mostly softer week, he said, adding that he has often observed such a pattern. He considered Friday’s gains more of a psychological bounce rather than fundamentally inspired. He didn’t think the change in Ike’s expected path was a significant factor, saying it was too early for that to have a price impact. However, the storm uncertainty may have created some minor price support, he acknowledged.
Despite Friday’s 12.7-cent increase by October futures, the producer said he doubted that prices will keep rising Monday.
It’s definitely looking like a premature fall season in the Midwest, a regional utility buyer said. His area doesn’t usually get temperatures as chilly as overnight lows in the low to mid 50s until late September, he added. That means his company currently has little gas throughput, with no heating or air conditioning load to speak of. Despite the chill, it was still too early for local folks to think about turning on furnaces, he said.
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