Cash prices rode the twin wave of Hurricane Rita’s threat to already hurting Gulf of Mexico (GOM) production and a record-setting screen spike the day before to further large gains Tuesday. A moderate warming trend across the southern states also chipped in some renewed power generation load.

The physical market’s advance Tuesday was generally even stronger than Monday’s and definitely more evenly dispersed among various market areas, thanks to soaring energy futures on Monday tending to spread the wealth around, so to speak. Most of the dollar-plus upticks were in the Gulf Coast this time as prices rose between about 30 cents and $2.40.

Florida Gas Transmission, which initiated a new Overage Alert Day Tuesday (see Transportation Notes), was the day’s big gainer in its production-area Zone 3 pool. Zone 3 is particularly vulnerable to storm-induced shut-ins in the Eastern GOM; it topped out with a quote of $16.75 and was just shy of averaging $16.

This week’s spike in cash numbers may have peaked in its second day, however. All of Nymex’s energy futures offerings were in retreat Tuesday, with the October natural gas contract wavering before finally closing down 17.1 cents to $12.492. A producer said he thought the screen reversal would pull cash lower Wednesday. A usually reliable indicator of that was spot gas quotes that started falling in late trading Tuesday after the Nymex opened, he noted.

With maximum sustained winds near 100 mph, Rita was upgraded to a Category Two hurricane while it pounded the Florida Keys and southern end of Florida. The pace of offshore evacuations and shut-ins picked up markedly Tuesday (see related story), enhanced by the dearth of helicopters and other aircraft that resulted from Hurricane Katrina’s devastation and which undoubtedly underlined the need for speed (and early starts) in such operations.

The rate of recovery from Katrina-related production outages, which had been disappointingly slow already, disappeared Tuesday as Rita caused shut-ins to start rising again. Minerals Management Service said that with 55 companies reporting to it by 11:30 a.m. CDT, it counted 3,481.71 MMcf/d as being offline Tuesday. That represented a jump of nearly 107 MMcf/d from the previous day. The MMS tally of evacuated platforms and rigs climbed to 136 and 15 respectively.

At 5 p.m. EDT the center of Rita was about 50 miles south-southwest of Key West, FL and about 55 miles north-northeast of Havana, Cuba. Rita was moving toward the west into the southeastern GOM at nearly 15 mph, the National Hurricane Center (NHC) said. The agency’s most recent projected tracking at that point had Rita staying on a westward heading that would keep its center well out in the Gulf over deepwater production facilities before beginning a northwestward turn south of central Louisiana that would take it to an expected landfall about 100 miles southwest of Houston on the Texas coast.

Although such a path might seem somewhat favorable to avoiding greater offshore damage, a marketer said he never tires of reminding people that the heaviest rains and highest winds of a hurricane tend to concentrate on its northern and eastern sides.

Affiliated pipelines Transwestern and Florida Gas Transmission raised the prospect that some of Thursday’s trading might be for flows through the weekend. They sent similar notices to shippers Tuesday saying their Gas Control and Market Services units “have started business continuity planning in the event of an evacuation of the Houston metropolitan area.” The two pipes said they have initiated plans to maintain operations in the event of a direct strike to Houston, but encouraged shippers “to conduct business prior to Friday morning to the extent possible.”

A Gulf Coast producer said it was a very real possibility that gas might be traded Thursday for the next four days, although such actions likely wouldn’t be universal throughout the market. Individual counterparties can agree to make deals for such flows, he said. He noted that his company’s E&P unit, along with those of other producers and trading partners in Houston, were making contingency plans and reserving hotel rooms outside the city. Austin, San Antonio, Tulsa and Dallas-Fort Worth were mentioned as their most likely destinations, he said.

Extra-day trading in the event of a Houston evacuation wouldn’t necessarily need to have everybody join in, the producer continued, even though many pipeline operators are headquartered in Houston. Thanks to the Internet, people can log onto online trading services from home computers to make deals if needed, he said.

What happened in Louisiana and Mississippi during Katrina has made people rethink their hurricane attitudes, the producer said. For example, a lot of people in the Florida Keys that usually insist on staying put during a hurricane evacuated instead this time, he said. “The path [of Rita] looks like it’s going to visit nearly every offshore production area that Katrina missed,” he commented. It was the Eastern Gulf and South Louisiana that were affected most by Katrina, he said, but it looks like the Western Gulf and Texas coast that will take the brunt of the storm this time.

An Upper Midwest marketer said his end-user clients “are very worried about winter supplies” with Rita following Katrina. He was relieved to see the screen falling Tuesday, thinking it had been irrationally pressured higher Monday. The marketer said he has talked with suppliers a little about the October bidweek, but nobody wanted to throw out any numbers yet “because of the way screen is bouncing around.”

Except for normal conditions in the southern third of Florida, the National Weather Service predicts above normal temperatures during the Sept. 26-30 workweek everywhere south and east of a line curving southwestward from northern Maryland through central Virginia and Tennessee into eastern Mississippi. It also expects above normal readings between lines running north from central Texas and central Arizona, widening to include northern Idaho and Washington state to the west and most of the Upper Plains and Upper Midwest to the east. Below normal temperatures are forecast for northern New England, western Nevada and nearly all of California.

Analyst Ben Smith of Enercast is predicting an injection of 62 Bcf for the upcoming storage report. Citigroup’s Kyle Cooper weighed in with an estimation of a 69-79 Bcf build, while Ron Denhardt of Strategic Energy & Economic Research looks for a 68 Bcf injection.

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