“Storm hype” was billed as the overriding reason for Friday’scontinuation of this week’s price increases that accomplished whathardly anbody thought possible: bring some points back to eitherside of September indexes. The new gains defied the usual weekenddemand slump, growing complacency about finishing storage injectionseason comfortably, a mostly negative screen and cool, autumn-likeweather in many major market areas. In wide-ranging trading,influenced largely by a similarly volatile futures contract, mostcash points ranged from barely up to as much as 15 cents higher.The majority of the gains tended to be on either side of a dime.
The conspicuous exceptions to the generally higher cash marketwere at the PG&E citygate and Southern California border, whichfell about 2 and 4 cents respectively. PG&E surprised manywestern traders by not declaring a high-inventory OFO, but SoCalGas met their expectations by issuing a Overnominations Day notice(similar to a high-inventory OFO) for Saturday. One sourcespeculated that widespread expectations of a PG&E OFO hadovercome the lack of one and contributed to the citygate dip.
Floyd officially became a hurricane and was being followed bytwo Atlantic systems that could become Gert and Harvey. AlthoughFloyd was threatening the northern Leeward Islands and Puerto RicoFriday, that still left it with a very long trudge to the Gulf ofMexico. But that remoteness didn’t reassure many gas traders. As amarketer pointed out, “All these people care about is whetherthere’s even the slightest chance of a hurricane disruption, andthey don’t want to be short over a weekend in that situation.”
Although the storm dominated trader talk about the new pricerises, there were a few other suggestions about Friday’sbullishness. Despite a nickel’s drop on the screen that day, somepeople tended to panic when it opened initially higher and thoughtcash should be higher also, a western source said. And aNortheast-oriented marketer said Thursday’s huge futures run-up ofnearly a quarter provided some carryover support for cash Friday. Alarge aggregator noted the continuing remarkable strength of crudeoil futures, which tacked on another 35 cents to $23.55/bbl.Barring a crude collapse, there’s no doubt that gas will be thefuel of choice over fuel oil for many utilities this winter, hesaid.
Average prices may have continued rising, but they were fallingrapidly in late activity. It wasn’t uncommon for single sources toreport ranges of 20 cents or so at any given point. Citing thescreen instability, a marketer said Henry Hub started in the low$2.90s only to fall just below $2.70 at the end. Sonat was draggedlower as trading went on by a rumored OFO, which nevermaterialized, he said. A buyer who paid a just-above-index $3.04into Columbia-Appalachia got a deal at $2.96 near the end oftrading.
A marketer considered the late cash fallbacks a case of “somereality setting in.” He thinks it will take “a lot more than acouple of storms to keep prices above index,” as his Northeastcitygates were Friday.
The MOPS outage of 130 MMcf/d was ending much sooner than expected(see Transportation Notes).
A marketer taking early October basis readings pegged theChicago citygate at plus 6.5-6.75.
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