Gas production shut ins due to Hurricane Ivan rose to more than 6 Bcf/d, according to a mid-day tally Wednesday of 65 companies by the Interior Department’s Minerals Management Service (MMS). But those production losses barely phased the weak natural gas cash and futures markets. Cash prices were down another 5-15 cents in regions other than Gulf Coast Louisiana and the Northeast, and most Louisiana points were flat to up only a nickel.

Florida Gas Transmission once again was the exception in the Gulf Coast region, with much higher increases being reported due to strong weather related demand and short supply availability. Northeast points were generally weak with New England locations down as much as 15 cents while some other Northeast points managed gains of a dime or more.

Meanwhile, near-month futures also tumbled on weakening Ivan and Tropical Storm Jeanne, which the National Hurricane Center expects to run up the Atlantic Coast rather than cross Florida and enter the Gulf. October futures prices declined 10.4 cents to $4.824. The latest report on Ivan projects that it will make landfall very early Thursday morning near Mobile, AL, with 135 mph winds and hurricane force winds extending from Grand Isle, LA, to Apalachicola, FL.

The MMS reported that a total of 575 platforms and 69 rigs had been evacuated Wednesday and 1.3 million bbl/d of oil and 6.04 Bcf/d of natural gas had been shut in because of Ivan. The shut-in gas represented about 49% of total Gulf gas production. The Interior division also raised its shut-in numbers for Tuesday to 4.5 Bcf/d of gas and 1.1 million bbl/d of oil.

On Wednesday, Gulf Coast pipelines reported the following supply losses: Trunkline, 700 MMcf/d; Southern Natural, 800 MMcf/d; Tennessee 900 MMcf/d; Transcontinental Gas, 1,300 MMcf/d; Gulfstream, 600 MMcf/d; Texas Eastern, 300 MMcf/d; and GulfSouth, 600 MMcf/d.

Several pipelines have been under operational flow orders since Tuesday with strict supply allocations and high penalties for violations. Transco, for example, has an unauthorized overpull situation with penalties at the IT rate for greater than a 3.5% tolerance and beyond that penalties of $5/Dth for the next 100 Dth and $25/Dth for volumes greater than that.

However, pipeline shippers appear to be managing the situation well. The pipelines have reported no difficulties meeting nominated deliveries. A lot of it has to do with the current demand weakness.

“It was incredibly boring today,” said a New England marketer who was reached on his fishing boat. “I’m taking the rest of the day off. Why risk being cut. There was no demand in New England at all. Algonquin took a pretty good dive. There was some generation demand in New York but not much.

“The cash market was a carbon copy of yesterday. Everyone is using their gas in storage because you can take storage and replace it with cheaper October purchases because of the Hub premium to October futures right now. It should lead to a much lower injection number next week,” he speculated.

A Northeastern local distributor said she was staying on the sidelines Wednesday. “We have enough supply right now that we’re getting by. We didn’t sell any gas either knowing that we might not get our supply. We only had one customer call today anyway. It was very quiet. We have very mild temperatures and there’s a lot of uncertainty about supply so why bother.”

A Gulf producer said he spent the day bringing gas to Southeastern markets via backhaul or displacement rather than risking Gulf purchases that might never show up. “I’ve been taking gas from north to south. I can come from the Chicago area and Michigan and meet Southeast markets by displacement.

“It was much quieter in the term markets today,” he said. “It seems like everyone is prepared for what is going to happen. Gulf prices stayed strong, but Chicago got hammered after trying to hang with the Hub for a while. We hit $5.08 and then ended near $4.85. There isn’t any load. There also was a lot more storage gas entering the market today. October basis is pretty weak so if you have reinjection ability in your storage you could come out and pay it back at the end of the month or in October.”

He said early predictions show a large storage injection in Thursday’s EIA storage report and continued weakness in the cash and futures markets. “If I was a betting man, I would expect Chicago and the Northeast points to disconnect even more from the Gulf tomorrow with Gulf prices increasing again but the markets continuing to come down. We don’t have the load and we have lots of storage plays. Once people figure out they can backhaul, they get more efficient doing it. But it all depends on if there are reports of production infrastructure damage.”

Early storage predictions range from 80 to 90 Bcf. Last year during the same week, 101 Bcf of gas was injected but the five-year average is 83 Bcf. The weekly storage report includes the Labor Day holiday weekend, which may have enable storage holders to inject even more gas because of lighter demand.

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