The cash market decided to ignore the slow pace of offshore production recovery from the one-two punch of hurricanes Gustav and Ike and instead focused on the overall lack of weather-based demand for those missing supplies Friday. Abetted by the previous day’s 28.9-cent decline in October futures and the weekend dropoff of industrial load, the weakness of weather fundamentals drove all but a few Texas points lower. Just as there were quite a few triple-digit increases on Thursday, several points saw drops of about a dollar or more Friday.
One source suggested that Thursday’s above-expectations storage injection further increased comfort levels about season-ending inventories and contributed to the bearish mood of Friday’s cash trading.
Most of the market fell anywhere from about a dime to $1.30 or so. The triple-digit losses were at scattered locations.
Several points in East and South Texas ranged from flat to up a little more than a quarter. Although the cool spell that had dominated Texas weather in the wake of Ike was dissipating, it wasn’t being replaced by very hot weather. Only a few locations, mostly in South Texas, were forecast to get above the mid to upper 80s Saturday.
The Northeast was expected to see a cool weekend, but the midweek frost and freeze warnings for the region’s northern end had dropped out of the forecast. The Midwest had begun a warming trend Friday that would extend into the weekend, but it was taking highs only into the fairly comfortable low 80s.
The Midwest was actually due to be warmer Saturday than much of the South, where peak temperatures were heading in the opposite direction and were predicted to average in the mid to high 70s. The South has experienced a rather mild summer for the most part, and fall would arrive over the weekend in the region amid conditions more conducive to the season’s middle than its start. Florida was an exception to the South’s overall cooling trend, with highs in the Sunshine State destined to be in the upper 80s. For that reason Florida Gas Transmission kept an Overage Alert Day in place through at least Friday.
Although highs in parts of the desert Southwest would be pushing the century mark during the weekend, the rest of the West was expected to range from moderate to cool.
A system over the Lesser Antilles islands that the National Hurricane Center (NHC) had given a low chance of development Thursday strengthened a bit Friday into a tropical wave, and by then NHC was rating its development odds as medium (20-50%).
Rapid progress on restoring Gulf of Mexico production in federal waters, which had looked promising early last week based on initial reports of little serious hurricane damage to infrastructure, was still moving at a relative snail’s pace as the week ended, although the mostly softer cash market didn’t reflect it. Minerals Management Service (MMS) said 67 companies had reported 5,576 MMcf/d in remaining natural gas shut-ins Friday, down only 164 MMcf/d from the day before. MMS said oil shut-ins also dropped minimally to 1,160,174 b/d, while evacuations of platforms and mobile drilling rigs were down to 262 and six, respectively (see related story).
El Paso, which had reported low system linepack Wednesday and Thursday due to shippers running negative imbalances, said customer cooperation had been sufficient to return linepack levels to normal Friday.
A Houston-based producer said trading in the area was somewhat near normal again Friday, but not all the way there after many traders evacuated the city or traded from off-site places away from their offices in the early part of last week. He thought most Houston-area traders would be back to their normal routines in the coming week. Of course there were some, such as himself, whose homes had been without commercial power for nearly a week Friday afternoon.
The producer said he traded mostly at South Texas points Friday, which constituted one of the few mostly firmer market areas. Prices were up initially to around $7.00 Friday morning after averaging $6.80 or so Thursday, but could only partially hold their gains and retreated a bit in later deals, he said. He was “kind of neutral” about Monday’s cash market, predicting it will see range-bound trading with not much change in prices either way.
Gulf Coast traders generally have been successful in working around the offshore shut-ins, processing plant outages and pipeline constraints, the producer added.
The number of drilling rigs actively searching for natural gas in the U.S. dropped by 17 to 1,589 during the week ending Sept. 19, according to the Baker Hughes Rotary Rig Count (https://intelligencepress.com/features/bakerhughes/). All of the decline occurred onshore, as the GOM tally was unchanged. Baker Hughes said its latest count is flat from a month earlier but up 9% from the year-ago level.
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