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Some Weekend Price Plunges Exceed a Dollar
Cash prices cratered Friday with quite a few points taking dives of more than a dollar. The entire market — pressured by forecasts of widespread mild to cool weather that was entirely appropriate for early autumn, bountiful storage inventories and the normal slump of industrial load associated with a weekend — fell by around 55 cents or more, except for a couple of Gulf Coast pipes whose losses were limited to a little more than 30 cents.
Cold fronts predicted for the weekend in the South, Midwest and Northeast weren’t expected to generate any significant heating load. However, morning frostiness in the mountains of the Northeast starting Sunday could reach the suburbs of metropolitan areas by Wednesday, according to The Weather Channel, which could prompt the firing up of some furnaces.
But the near-term price outlook remains negative. “We have very little demand on our system,” said a Northeast utility buyer, citing the gorgeous weather in his area Friday. He reported buying small amounts of gas at Niagara and in Appalachia, which he said was cheaper than hauling gas from the Gulf Coast. He interpreted Friday’s big plunges as a sign that the market was finally facing up to the reality of weak fundamentals that have been around for some time but for various reasons have not always dictated lower price trends.
One source said he couldn’t help but wonder how much softer prices would be if it weren’t taking so long for Gulf of Mexico production to recover from Hurricane Ivan “the Terrible.” Usually most if not all hurricane-related shut-ins have been eliminated within three or four days after a storm leaves the area, but these are dragging out for a lot longer, he noted.
As if to underscore that thought, Minerals Management Service reported absolutely no change in shut-in statistics from Thursday, saying the total still stood at 2,321.26 MMcf/d Friday, according to reports from 22 companies received by 11:30 a.m. CDT. That does not necessarily mean that no progress occurred in restoring shut-in flows. As MMS explained: “These cumulative numbers reflect updated production numbers from all previous reports. In previous reports, there have been numerous questions regarding the increase of [restarted] shut-in production on a day-to-day basis. However, the reports only represent those received by 11:30 a.m. CDT. If a company does not report by 11:30 a.m. it is not included in the daily special information release, but it is included in the cumulative shut-in production.”
A Midwest marketer doesn’t expect a lot more softness in the next week or two, saying most of the big fall in prices took place Friday. He thinks the Chicago citygate will hover in the $5.00-5.25 range for a while “unless some colder weather arrives soon.” His section of the Midwest was “kind of chilly in the mid 50s” Friday, and he had even seen some frost lately. There’s probably a small amount of heating demand occurring, but not enough to rally the market, he said.
Western markets got a small lift from PG&E keeping its latest high-linepack OFO a one-day affair. However, that was negated by SoCalGas issuing its own OFO for Saturday (see Transportation Notes).
November natural gas futures slipped a little more than 2 cents. The decline was much greater during the morning, but the gas screen recuperated somewhat due to the crude oil contract recording its first-ever daily settlement above $50/bbl.
Citigroup analyst Kyle Cooper said his initial projection for the upcoming storage report calls for a build near 70 Bcf.
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