In trading ranges that were stretched extensively due to post-storage report dives, cash prices were rather indecisive Thursday, ranging up and down from flat by up to a dime in both directions. Small gains tended to outweigh small losses.

However, there seems little doubt that weekend prices will take a major beating Friday. The storage report by itself was enough to presage substantial softness as the Energy Information Administration handily surpassed prior expectations by saying 82 Bcf was injected last week. The screen reacted as one would expect, diving by nearly 29 cents on the day, and the few remaining cash deals left to be completed after the report came out behaved similarly. As usual, most of the cash market’s response will show up in next-day activity.

To exacerbate matters, a massive power outage struck dozens of cities in the Northeast, Midwest and eastern Canada late Thursday afternoon (see story in Power Market Today). Some news reports linked the outage to overloading of the Niagara Mohawk Power grid in upstate New York. Terrorism was not believed to be involved.

Most gas traders had already left their offices by the time news of the blackout circulated. But one source speculated that many businesses in the stricken region will not be operating Friday, cutting into gas load. Otherwise it depends on how long the electric utilities remain down, he said. If the power is still out Friday, it likely would mean substantial turnbacks of gas supplies into an already weak market.

A potential offsetting factor for gas demand was an Associated Press report that the blackout took down four nuclear plants in Ohio and New York.

The event also could disrupt the weekend plans of gas suppliers, the source continued, because of the potential for patchwork restoration of the electric transmission grid. Utilities and other power generators may require the resumption of deliveries at various times during the weekend as their systems come online again, he said.

The power crisis and storage report almost overshadowed the sudden development of Tropical Storm Erika as it began to move into the eastern Gulf of Mexico, which could counteract the storage/blackout bearishness to some extent. Like the East’s blackout, Erika didn’t make the jump to named storm status (the 2003 season’s fifth) until late in the afternoon, bypassing designation as a tropical depression along the way.

After having dumped copious amounts of rain on southern Florida, the poorly defined center of Erika was about 350 miles southeast of the mouth of the Mississippi River as of 5 p.m. EDT, according to the National Hurricane Center. It was moving westward at nearly 21 mph, a course expected to continue over the next 24 hours, NHC said. Maximum sustained winds were nearly 40 mph. “Tropical Storm Erika could threaten southern Texas or northeastern Mexico within the next 36 to 48 hours,” NHC said. “Watches or warnings will likely be issued tonight [Thursday] or early Friday.”

While the system was still considered only a tropical disturbance, a Gulf Coast marketer said that if it proceeded west from the southern end of Florida, such a course would carry it well south of most production areas. “Destin Pipeline might be affected most since it serves way-out deepwater production,” he said. But if the system failed to get any stronger than it was at the time, he didn’t think it would be threatening enough to justify offshore platform evacuations.

A spokesman for Gulfstream said their gas control center reported not hearing of any plans for producer evacuations and/or shut-ins, but that was prior to the emergence of Erika as a tropical storm.

A Midwest utility buyer said temperatures would be getting “a little hotter this weekend,” but only to about 90-91 degrees, which he regarded as too insignificant a warmup to rally prices. He thought the screen might see a little rebound Friday from Thursday’s plunge, “but cash will definitely be down.”

Citigroup analyst Kyle Cooper noted that his estimation for the storage report “was indeed low as we were once again caught with a weekly ‘averaging’ problem. We don’t normally dispute the weekly numbers, but this week did seem strange with the West injection number much larger than the last two weeks and the producing area region 6 Bcf higher than the prior week despite record ERCOT [Texas] generation. It definitely seems that this week ‘caught up’ to a number last week that was too low. However, regardless of whether the molecules were actually injected last week or this week, the fact remains that the molecules are indeed available and that is indeed quite bearish.”

Cooper went on to note that Thursday’s report represented another record injection for the comparable week, and that of the 19 weeks so far in the injection season, eight have represented new weekly maximum injections. “…prices are headed lower,” he concluded.

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