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Screen, ‘Storm Hype’ Accelerate Price Increases
Although “storm hype” was a popular phrase in market discussionsThursday, the hype factor was beginning to fade in the afternoon asTropical Storm Bret achieved named status, prompting the Mexicangovernment to post coastal storm warnings from Tampico southward.Some strengthening of Bret is likely over the next 24 hours, theNational Hurricane Center said in a 4 p.m. CDT advisory.
While the storm in the Bay of Campeche remains far from being athreat to Gulf of Mexico production at this point, its mereexistence caused the run-up in both cash and futures prices to keepbarreling along. The screen gained slightly over a dime, and manyphysical points managed to match the futures strength penny forpenny or surpass it in some cases. Except for increases tending tobe smaller at some western points, Thursday’s gains were remarkablyeven across the country.
A marketer thought at least part of the price firmness was basedon a relatively low storage injection figure from AGA Wednesdayafternoon.
Not only were Northeast citygates solidly on the plus side of$3, but CNG quotes were also, and only a few reports placed TCO atless than $3. Midwest citygates failed to break $3 but came closewith averages in the mid $2.90s.
“You take the storm, continued heat in the South and decliningdeliverability; add them all up and it comes out higher gasprices,” said a Gulf Coast producer. He was starting to wonder ifpeople might start backing off on storage injections at currentprice levels, but added, “Whether they do or not, it’s going to bea case of pay me now or pay me [potentially much more] later.”
The producer acknowledged that his company’s drilling program isstill not very active after major cutbacks last year. New wells arebeing lined up very slowly, he said, noting that producers havelearned to be cautious about rapid escalation of drilling merelybecause gas prices have risen. Too quick a ramp-up only leads toprices plunging again, he said.
Eastern prices may continue rising today, a marketer in the Westsaid, but he’s prepared for the usual weekend slump in his region.A storm in the Gulf won’t be enough to offset the West’s fall indemand, he said.
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