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Screen, New Fay Concerns Boost Nearly All Points
The previous day’s 8.8-cent gain by September futures, along with some forecasters saying there was a chance Tropical Storm Fay could reenter the Gulf of Mexico (GOM) closer to the offshore production area, resulted in higher prices in most of the cash market Wednesday.
Several flat to nearly 20 cents lower points, mostly in the Rockies, kept mixed price movement in play. Gains ranged from a little less than a dime to about 50 cents, with only two of the upticks failing to reach double digits.
Whereas on Tuesday the National Hurricane Center (NHC) had expected Fay to cross the southwestern corner of Georgia before moving into Alabama, on Wednesday the projected tracking kept the storm in the Florida Panhandle all the way into Alabama. NHC’s “five-day cone” of possible paths extended into the GOM as far west as the southeastern corner of Louisiana. However, the most likely path continues to be northwestward into central Alabama.
Analyst Daniel Guertin of Lehman Brothers commented: “After actually strengthening yesterday [Tuesday] over land, a phenomenon most unusual for tropical systems, Tropical Storm Fay finally weakened overnight, with winds falling from 65 [mph] to 50 [mph]…Over the next two to three days, Fay will likely move slowly westward again into the northeastern Gulf of Mexico and meander in this region for a couple more days…Regarding impacts on the U.S. energy producing region in the northern Gulf of Mexico, Fay is forecast to remain east of the region. However, if Fay does make it back into the northeastern Gulf of Mexico and begins to strengthen again, at least precautionary oil and natural gas shut-ins are possible later this week and over the upcoming weekend.”
Fay barely moved offshore again Wednesday, with its center about 30 miles north-northeast of Cape Canaveral on Florida’s eastern coast at 5 p.m. EDT, NHC said. It also was barely moving, with a northward speed of about 2 mph. A gradual turn to the northwest Wednesday night and to the west-northwest Thursday was likely, NHC said, adding, “Fay is forecast to move very slowly across northern Florida on Thursday.”
The federal agency downgraded the potential for development of a low-pressure area about 1,300 miles east of the Windward Island to low Wednesday after having rated it as medium Tuesday.
Despite Fay having already cooled off southern Florida and starting to do the same in northern Florida, Florida Gas production-area zones and the Florida citygate saw some of Wednesday’s biggest gains.
Thursday’s cash market will have prior-day screen support again after the September futures contract recorded a 10.1-cent advance (see related story).
Wednesday’s price firmness also was based on warming trends due in the Northeast and Midwest, although with highs still limited to the 80s or less, the increases in cooling load were likely to be marginal. The central section of the South will start seeing peak temperatures approach 90 or so again ahead of the tropical storm’s approach, while the region’s southeastern and western ends are being kept cooler than normal by heavy rainfall.
It’s the same old same old weather pattern in the West: blazingly hot in much of the desert Southwest, moderately warm in the Rockies and inland California, and mild to cool on the California coast and in the Pacific Northwest and Western Canada.
Prices started near the top end of their trading ranges and ended near the bottom, said a Midcontinent producer. Because of that trend — and despite another futures advance — he expects lower cash numbers Thursday. Fay may stay closer to the Gulf than previously expected, but the producer thinks it will be weakening on its trip along the Florida Panhandle to the extent that it will be no threat to offshore infrastructure.
Barclays Capital Research analysts Michael Zenker and George Hopley are forecasting an 86 Bcf storage injection for the week ending Aug. 16, which they said will reflect a return of shut-in Gulf production and milder temperatures across the East.
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