Prices continued to fall at nearly all points Tuesday, but the declines were considerably smaller than Monday’s, and the exceptions were a flat Sumas and a small gain of about a nickel at Texas Eastern-East Texas. The increasing likelihood that Tropical Storm Ernesto will avoid the Gulf of Mexico production area, massive screen weakness on the day before and a continued dearth of substantive cooling load outside the South and Southwest were cited as factors in the softness.
Double-digit drops remained dominant Tuesday, but a few points fell by only about a nickel, and decreases were capped around half a dollar instead of the near-dollar plunge that Henry Hub had experienced Monday. Rockies points recorded all of the largest drops, having lost much of their inland California power generation market since the recent western heat wave abated. Sacramento, which regularly saw 100-degree-plus highs during the heat wave, was predicted to fall a little short of 90 Wednesday.
The combination of flat Sumas numbers and Northwest-domestic pricing falling by half a dollar left Sumas at a 70-cent premium over the domestic product. The gap had been only about 20 cents Monday.
Florida Gas Transmission issued an Overage Alert Day for Tuesday, indicating low linepack and high market-area demand, but indicated that the cooling rains Ernesto is expected to bring to Florida may very well change that into an Underage Alert Day Wednesday (see Transportation Notes).
The storm had emerged from Cuba’s north coast since late Monday afternoon and was bearing down on the Florida Straits Tuesday, but Ernesto’s projected path through the rest of the was virtually unchanged — up Florida’s eastern coast and then returning to sea for a while before hitting land again in South Carolina and continuing through the Mid-Atlantic into the lower Northeast.
Ernesto had strengthened a bit during its overnight sojourn over warm water, with maximum sustained winds up about 5 mph to 45 mph, the National Hurricane Center (NHC) said. At 5 p.m. EDT Tuesday the agency placed the storm center about 105 miles east of Key West, FL and about 105 miles south of Miami. Ernesto was moving toward the northwest at nearly 13 mph and the center would be nearing the Florida Keys and extreme southern Florida Tuesday night, NHC said, although rains and tropical storm-force winds were arriving well in advance of the center.
Major producers were reported to have begun returning evacuated nonessential workers to offshore rigs and platforms Tuesday. Other than a few deepwater wells that had been shut by Shell as a precaution, few if any shut-ins were believed to have occurred, and Shell expected flows at the shut wells to be restored quickly.
Based on Ernesto’s expected path as well as its current and projected intensity, Southern LNG said Tuesday it does not expect any impact to operations at the company’s Elba Island LNG terminal near Savannah, GA. “However, the Savannah Captain of the Port may interrupt shipping traffic that may in turn affect the receipts of LNG for its shippers’ storage accounts,” Southern LNG said. It plans to post an update no later than 9 a.m. EDT Wednesday.
The expiring September futures contract appeared to be in for another down day for most of Tuesday, but a dramatic late reversal sent the screen to a $6.816 settlement, up 34.4 cents on the day. A major reason for the sudden turnaround was believed to be a lot of market-on-close (MOC) buy orders that found few corresponding sellers (see futures story).
“You’ll have higher daily cash prices Wednesday” largely due to Tuesday’s late screen run-up, a Gulf Coast producer confidently predicted. However, he noted that the futures turnaround made it harder to complete September baseload deals that afternoon, as apparently people got a little more reluctant to commit to bidweek business. (Another source speculated that buyers may have been spooked by the sudden change of market attitude.)
The producer said he saw little change in bidweek prices Tuesday from the day before. His company could do a little more September business Wednesday if it needed to, he said, but essentially it was a case of stick a fork in them; “we’re done.”
A Calgary-based producer was pleased to see the late futures run-up, saying it “certainly helps some of our [trading] positions.” He saw the screen action both as a push to bring the September contract back up to near where October was trading and also as “a bit of bouncing” between Friday’s strength and Monday’s weakness. In his experience, bidweek prices were moving lower in the morning while the screen was still heavily into negative territory, but he said mid to late afternoon September deals were rebounding in response to the Nymex spike.
The National Weather Service (NWS) looks for a hotter than normal West and a mostly moderate East during the Sept. 4-8 period that begins with Labor Day. It predicted above normal temperatures everywhere west and north of a line running northward through central Arizona and eastern Utah before curving northeastward through Wyoming to include the northern half of South Dakota and the northwestern quadrant of Minnesota. Above normal conditions also are expected in the southern tip of Texas, the southeastern corner of Louisiana, the southern two-thirds of peninsular Florida and upper New England. NWS predicted below normal temperatures in a broad swath extending from New Mexico and most of Texas through the Midcontinent and most of the South into the , Mid-Atlantic, Lower Midwest and southwestern end of the Northeast.
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