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Rockies Recovery Spikes Lead Overall Firmness
Prices soared by triple-digit amounts in the Rockies Thursday as the regional market continued a recovery from extreme weakness that featured low-end quotes of less than a dime in the previous two days. Most points elsewhere achieved moderate gains, but Thursday was likely to be the last day of this week’s overall market advances.
The Rockies spikes ranged from a little less than $1.30 to the $1.70 area. A majority of points in the rest of the market were flat to about a quarter higher. Losses of up to about a dime again were concentrated in the Midcontinent and Southwest basins.
Tropical Storm Humberto was upgraded to hurricane status shortly before making landfall early Thursday morning on the Texas coast southeast of Houston. Having sprung up so suddenly (The Weather Channel said its progression from depression to hurricane in a little more than 14 hours was the fastest such occurrence ever) and so close to the Texas coast, Humberto apparently caused little or no disruption of offshore production since producers had little time to react before the storm’s presence made it unfeasible to dispatch evacuation helicopters.
Instead, the primary impact of Humberto, which was downgraded to a tropical storm again as it crossed the Sabine River from East Texas into Louisiana and subsequently to a tropical depression, on the gas market is demand destruction. A Gulf Coast producer said power generation demand had been declining already in the South this week, and it should keep going down through the weekend with Humberto’s rain cooling off much of the region. He was not aware of any storm-related evacuations or shut-ins.
What the National Hurricane Center called a “poorly organized” Tropical Depression Eight (TD8), still about 865 miles east of the Lesser Antilles as of 5 p.m. AST Thursday, was much too remote to become a gas market influence before next week. TD8 may not even be a factor then (except possibly for further demand destruction); unless it veers more to the west from its currently projected tracking, the potential Tropical Storm Ingrid will hit the South Atlantic coast.
The Energy Information Administration was in line with consensus expectations in the low to mid 60s Bcf when it reported a storage injection of 64 Bcf for the week ending Sept. 7. Though the volume was relatively bullish in comparison with a much larger year-ago build of 103 Bcf and the five-year average of 88 Bcf, Nymex traders preferred to focus on Humberto’s failure to put a dent in Gulf of Mexico production and the moderate weather that dominates most areas in sending October natural gas futures 40.9 cents lower. The gas contract’s weakness was in sharp contrast to the action in crude oil futures, which put in their first-ever daily settlement above $80/bbl.
The Rockies were able to achieve their big comebacks largely because a three-day maintenance shutdown of two compressor stations at Northwest’s southern end was being completed Thursday, leaving a clear path for Rockies gas to move south again into the El Paso and Transwestern systems. Also, there was some regional heating load developing with Denver predicted to see overnight lows in the low to mid 40s both Thursday and Friday.
The extra competition for market from Rockies gas resulted in drops of a little less than a nickel in El Paso’s two San Juan Basin pools.
The market is getting a modicum of support from cool to downright cold temperatures in some areas, particularly the Midwest and Upper Plains. Most parts of that section of the U.S. are forecast to see Friday lows on either side of 40 degrees, with some cities near the Canadian border expected to go below freezing. The Northeast will be quite comfortable with peak readings in the 70s, while the eastern South will remain slightly below seasonable temperatures in the 80s until Humberto rains arrive. The desert Southwest is still the only source of major heat at this point.
Florida Gas Zone 3 recorded Thursday’s one of the biggest non-Rockies jumps of about 20 cents after Florida Gas Transmission issued an Overage Alert Day (see Transportation Notes). The Florida citygate was close behind in rising nearly 20 cents.
The Gulf Coast producer noted that lower prices Friday are a pretty sure bet after the big futures drop Thursday. The factors of weekend loss of industrial demand and generally moderate weather also will be in play, he said.
His company’s Rockies production didn’t get hurt much by the super-low prices earlier this week, the producer said, because virtually all of it is sold as baseload at first-of-month indexes.
Local weather has gotten pretty cool with overnight lows down around 40 degrees, “but it feels good to us,” said a utility buyer in the Lower Midwest. There has been little increase in heating load, though, she added, as people have just turned off their air conditioners, shut the windows and maybe thrown a blanket on the bed.
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