Instead of riding the coattails of prior-day spikes in energy futures higher, as some sources had expected, the cash market started paying more attention again to weak fundamentals Wednesday. The result was price declines ranging from about a nickel to nearly 40 cents in the East, with a couple of flat to barely lower points thrown into the mix.

Thanks to heat levels building up in the Southwest and PG&E’s lifting of a high-linepack OFO, western prices tended to hold up a little more strongly. Malin, Pacific Northwest and Western Canada joined in eastern softness, falling by up to about US10 cents at the south of the border points and by about C25 cents and C10 cents respectively at Aeco and Westcoast Station 2. However, other western points ranged flat to up a dime or so.

Just when it looked as if oil and gas price trends were trying to get in synch again (Tuesday), along comes Wednesday’s market to dash cold water on such a perception. November crude oil futures soared to yet another record, finishing the day just over $52/bbl, and were joined by huge gains in the heating oil and unleaded gasoline contracts after the government reported a drop in distillates (heating oil, diesel and jet fuel) inventories and a smaller than expected rise in crude stocks. Also, traders reportedly were fretting again about the possibility of a cut in Nigerian exports due to a threatened workers strike next week and still concerned with the nagging persistence of large Gulf of Mexico shut-ins.

So what happens in natural gas? The screen settles down 11.9 cents (admittedly a recovery from greater losses during the session in response to oil’s strength), and most of the cash market derives none of the usual next-day support from Tuesday’s futures spike.

It’s just as well, many gas traders would say. Much like early last week, the physical market was starting to look much overbought in relation to moderate weather forecasts and high storage levels.

It was not much of a cold front in the Midwest Wednesday, a marketer in the region said, and comfortable temperatures were expected again before the weekend. “We’re not really any worse off [now] as far as temperatures go than we were most of this summer,” he added. As an example of the Midwest’s dearth of weather-related demand, he noted that Michigan Gas Utilities has had an OFO against excess gas in effect pretty much since October began.

A Northeast utility buyer reported not making any new purchases for several days. It wasn’t that his company did not have any system load, but it just hasn’t liked the high prices, he said. It can dig a little out of storage as necessary to meet current needs while waiting for prices to go lower, the buyer said. “We’re already set up well on storage for the winter,” and have more than three weeks left in the injection season to top off accounts, he added.

As people had expected, it got cool in the Northeast, but that didn’t bring on any really noticeable increases in heating load, the buyer went on. With no hurricanes in sight and mild near-term weather expected, he found it reasonable to expect gradual softness in the cash market for a while. In addition, there’s still a possibility of major price drops later this month if bearish weather persists and storage levels continue to pile up, he concluded.

Restoration of shut-in Gulf of Mexico gas, which had speeded up in the first two days of this week, suffered a setback when Minerals Management Service announced an increase of about 65 MMcf/d in shut-in levels to 1,800.56 MMcf/d Wednesday. However, in an explanatory note the agency said the reversal was the result of a company not reporting since Sept. 22. Wednesday’s tally was based on reports from 23 companies — one more than on Tuesday. The cumulative count of deferred production since Sept. 11 reached 70.504 Bcf, or 1.584% of yearly Gulf output.

Despite the lack of Atlantic tropical activity, The Weather Channel (TWC) noted that showers and thunderstorms continued to flare up Wednesday in the western Gulf of Mexico but showed no sign of organization. “Still, the area will have to be watched, since several models suggest a low-pressure center could form in the northwestern Gulf over the next several days,” TWC said.

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