As expected, a combination of what some derided as “storm hype,” continuing heavy cooling load throughout the South and much of the West and prior-day futures support resulted in higher prices at virtually all points Wednesday. Only a quarter decline by Kern Delivery in the Arizona/Nevada market area averted across the board gains that included a $10-plus quote.
Just as Tuesday’s overall drops were fairly consistent across various geographic areas, so too were Wednesday’s double-digit increases. They ranged from about 20 cents to 65 cents.
Tropical Depression 5 was upgraded to Tropical Storm Erin Wednesday morning, but although its approach to production offshore South Texas gave a temporary lift to futures, its presumed threat was being downgraded later and the September contract eventually gave up a 7.6-cent loss (see related story).
The National Hurricane Center (NHC) expects Erin to go ashore around midday Thursday in the general vicinity of Corpus Christi, TX. As of 4 p.m. CDT Wednesday Erin’s center was about 195 miles east of Brownsville at the southern tip of Texas and about 210 miles south of Galveston, TX. The storm was moving northwestward at nearly 13 mph, the NHC said. Maximum sustained winds were nearly 40 mph (see related story).
According to reports, the general reaction of producers in the storm’s path remained cautious monitoring of the situation but few shut-ins or evacuations. Minerals Management Service(MMS) said two companies had reported the evacuations of five platforms and one mobile drilling rig to its Lake Jackson, TX, office south of Houston by 11:30 a.m. Wednesday, but Shell’s announcement of the shut-in of 5 MMcf/d Tuesday at its North Padre Island 175 field remained the only publicly known production taken off-line. That was a negligible amount of total Gulf of Mexico (GOM) production, MMS said.
A source told NGI that although offshore South Texas production in the North Padre Island area has grown quite a bit since the early 2000s, wells there were still relatively sparse compared with the upper Texas and Louisiana coasts. He thought Erin was going to be mainly “just a big rainstorm” and not much of a serious threat to production.
A spokesman said El Paso Corp.’s exploration and production unit had less than 2 MMcf/d of production in the path of the storm, so it was relatively insignificant for the company.
With Erin’s gas market impact seemingly being diminished, more attention was being directed to Tropical Storm Dean, which, while still remote, apparently will pose a much greater potential threat to GOM oil and gas production. Dean was intensifying over the central Atlantic and could become a hurricane either late Wednesday or Thursday morning, the NHC said. At 5 p.m. AST the storm’s center was about 910 miles east of the Lesser Antilles island chain and moving to the west-northwest at the rapid pace of nearly 22 mph. Maximum sustained winds had increased to nearly 65 mph, the NHC said.
The federal agency’s five-day projected tracking of Dean’s path had it skirting the southern coast of Jamaica Sunday afternoon and being poised to shoot the gap between the western end of Cuba and Mexico’s Yucatan Peninsula into the southeastern Gulf of Mexico late Monday.
Northeast citygate prices were getting pushed higher primarily by hurricane hype since the region’s weather will remain fairly moderate into the weekend, said a marketer. The basis spread from the Gulf Coast has been squeezed to 45-50 cents on pipes like Tennessee and Algonquin, he said; normally it’s more like 65-75 cents, and it’s not uncommon to see the spread expand to $1.10 or more at times.
Retail and power generation loads for gas are pretty light currently in the Northeast, the marketer continued. “It’s been a tough month to be a seller” there, he said. He expects “storm hype” to continue increasing production-area prices Thursday while the light gas demand should create softness in the market area, which would tighten basis spreads even further.
Despite Florida Gas Transmission (FGT) ending an Overage Alert Day (see Transportation Notes), Florida Gas Zone 3 prices averaging more than $9.40 easily outpaced the rest of the Gulf Coast. Zone 3 also topped out at $10.15 Wednesday.
A Florida gas buyer said intraday prices were significantly lower Wednesday but next-day prices soared. Besides the tropical storm influence, he thought the FGT spikes was a result of buyers in the state “borrowing” gas from storage in the last couple of weeks to cope with near-record demand from high heat levels, and now they are buying more gas to pay back the storage “loans.” Although it wasn’t reported to the NGI survey, he said his company had sold a Florida citygate package for more than $11 Wednesday.
In a possible indicator of impending softness in Southern Natural Gas prices, the pipeline said its estimated cumulative system cash-out imbalance for August had skyrocketed to a long position of 2,033,730 dekatherms as of Aug. 13.
Reuters said its survey of 21 industry analysts found an average expectation of a 22 Bcf storage injection for the week ending Aug. 10. Estimates ranged from minus 4 Bcf to plus 45 Bcf, the news service said.
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