Hurricane

Even with the hurricane-related disruptions from Gustav and Ike in September, prompt Henry Hub prices have remained below $8/MMBtu since the end of August, and as Gulf of Mexico production slowly recovers, supply strength elsewhere, economic weakness and a warm winter may pull winter gas prices below $7 by early next year, a team of energy analysts predicted Tuesday.

The Minerals Management Service (MMS) reported that 54 of 3,800 offshore oil and natural gas production platforms have been confirmed as destroyed during Hurricane Ike, which swept through the Gulf of Mexico (GOM) in the second week of September. The destroyed production platforms, which were mostly located offshore Louisiana in shallow water, produced a total of 90 MMcf/d and 13,300 b/d. MMS also reported that 35 platforms suffered “extensive” damage, which may take from three to six months to repair. Another 60 platforms received “moderate” damage, which may take one to three months before production resumes. Based on reports by 62 operators as of midday Tuesday, 90 of 694 production platforms remain evacuated in the GOM. MMS estimated that around 38.7% of the estimated 7.4 Bcf/d of usual gas production from the GOM was still shut in. About 44.8% of the 1.3 million b/d of oil production also remained shut in. In addition, the Energy Information Administration reported that five natural gas processing plants, with total operating capacity of 3.18 Bcf/d, remained shuttered.

While domestic natural gas production activity and storage remain at strong levels despite hurricane-induced disruptions and the global financial meltdown, gas consumers could wind up paying 10-30% more in home heating costs this winter, according to the American Gas Association (AGA).

As a result of the completion of inspections after Hurricane Ike, Sea Robin lifted Tuesday the OFO that it issued Aug. 30 for all receipt points.

Citing damages sustained from Hurricane Ike to its offshore Louisiana facility at Eugene Island 296, ANR declared a force majeure event and said it is not accepting receipt nominations from 10 meters (see the bulletin board for list).

While Hurricane Ike began to pound the Texas coast Friday near Galveston and petroleum products and natural gas futures climbed on the day, front-month crude futures broke below the psychological $100/bbl mark for the first time in more than five months before settling higher as well. October natural gas futures finished the week at $7.366, up 11.8 cents from Thursday but 8.3 cents lower than the previous week’s close.

At this stage, it’s still difficult to predict how much damage Hurricane Gustav may inflict on natural gas infrastructure on- and offshore along the Gulf of Mexico. However, the increase in gas production onshore in the past few months has led to a “sudden loosening of the supply and demand balance,” which was evident in storage data issued by the Energy Information Administration, Lehman Brothers analysts said in a recent report.

Declining U.S. natural gas prices have a champion in the petrochemical and fertilizer industries, and if prices remain low — an unknown as Hurricane Gustav bears down — U.S. industrial production (IP) dependent on gas could increase within some sectors, and provide a boost to gas-fired generators, according to energy analysts.

Several factors point to natural gas prices of around $11-12/MMBtu or more through the summer, but if there are no large hurricane production losses, the surge in onshore gas production in the storage surplus “could be visible for all to see” by late September, said an energy analyst.