New Screen Strength Generates Tiny Cash Rebound
The price plunge that had seemed to be gearing up Wednesday came
to a quick halt Thursday as cash quotes were "up a 'smidge,' maybe
a penny or two," according to a trader doing business in the
Midcontinent and Southwest. Sources dragged out the old refrain of
"following the screen," although the tiny upticks in cash lagged
far behind the near-dime increase in the Henry Hub futures contract
for June. Essentially the screen strength arrested a developing
bearish trend for cash.
A marketer reported substantial gas buying by Texas electric
utilities; after all, "it's hot down here," he said.
Many people tried to push prices down early, according to a
Midcontinent trader, "but we heard some early flat offers and thus
waited to make our sales until after some small increases had
Eastern points are trading for more than a dime below indexes,
but virtually all of the West is still in the vicinity of index
levels. Maintenance outages, both planned and unplanned, are
playing a large part in the relative western firmness. Wednesday
was the last day for San Juan Basin trading to be affected by
downtime at the Milagro plant, which ended Thursday, an aggregator
said. However, the basin will lose a net of more than 700 MMcf
Monday when the Blanco plant takes its turn for maintenance (see
Transportation Notes), he said. A marketer said he was already
getting calls for Monday-only San Juan gas and is looking for price
increases today in both the San Juan and Permian Basins.
Malin and PG&E citygate numbers are a few cents over index
largely due to constraints on the PG&E Gas
Transmission-Northwest system (see Transportation Notes), a
marketer said. Because the constraints are upstream of Stanfield,
they also are supporting prices at Sumas and Stanfield, he said.
One factor that may have helped prop up gas prices recently is
the cost of penalties for electric utilities failing to toe the
line on nitrogen oxide (NOx) emissions, according to a market
analyst. Paul Messerschmidt of Energy Security Analysis Inc.
pointed out to a GasMart/Power '99 audience earlier this week that
May 1 was the start of the 1999 ozone season in the Northeast. For
plants without the required NOx credits the penalty is $6,600 per
ton, "which creates a NOx penalty for coal, whether it's eastern or
western, north of $15/MWh," Messerschmidt said. "At that price
you're going to think long and hard before running a coal plant.
Some utilities that aren't sure how many NOx allowances they are
going to need for this year may have decided to front-load some of
their gas consumption early in the ozone season."
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