West Plunges; Heat Supports Prices in East
As many had expected, prospects of severe heat averted much of
the softness that normally accompanies a Fourth of July weekend,
considered the year's lowest demand period. But that was true only
in eastern markets Friday. The bottom was dropping out for prices
in the West, particularly at the Southern California border.
Cooler weather in California combined with high-inventory
OFOs-both real and potential-to bring down prices throughout the
West. Only flatness in intra-Alberta, where storage injections
tended to soak up much of the available supply, survived the plunge
following a Canada Day holiday hiatus. The Permian Basin and Waha
resisted the softness more than other points because of air
conditioning load in Texas and the Midcontinent/Midwest.
Southern California Gas continued an Overnominations Day(OD)
declaration, initiated Thursday, through at least Saturday, and
that knocked the stuffing out of border quotes. The border, with a
$2.44 average Thursday that was over a nickel above index, was down
to the $2.30s immediately Friday and quickly kept eroding until
last-minute deals were being reported as low as $2.00.
Some people thought that Thursday's OD might have taken enough
gas off the SoCal system so it wouldn't last, said an
Oklahoma-based trader, "but that didn't happen." The OD notice was
properly posted on the utility's GasSelect bulletin board by 9:30
a.m. PDT Thursday, he said, but then acknowledged that few people
were likely to be looking for an OFO-like issuance then because
they are quite rare on weekdays. (Another source said his company
was unable to gain access to the bulletin board until some time
well after 9:30.)
Pacific Gas & Electric continued to expect a high-inventory
situtation would remain for its system through Monday but had
refrained from issuing an OFO as of Friday afternoon. Widespread
trader expectations of an OFO caused PG&E citygates to drop a
little over 20 cents.
The considerable weakness of the California market spilled over
into the Rockies and Southwest, where several points recorded
declines in the double digits, led by a San Juan Basin fall of
nearly 20 cents.
Meanwhile, it was obvious that Northeast buyers were taking hot
weather forecasts to heart and stocking up on gas for the holiday
weekend just in case, a marketer said. She thought Transco Zone
6-NYC deliveries were up about a nickel "because there weren't a
lot of sellers involved today [Friday]" due to holiday concerns.
Another source saw the region's utilities as active buyers
"preparing for the worst." Sunday looks to be the peak day of the
holiday period, he said. "They [utilities] will likely be burning
everything Sunday and turning back the excess on Saturday, Monday
and Tuesday," he predicted.
The Northeast demand stabilized Gulf Coast prices at flat to a
few cents lower. Trading activity certainly got sparse in a hurry,
though, said a marketer as he and others had fewer deals to report
than usual. Sonat numbers got pushed down by the potential of a
weekend OFO, but none ever materialized, he said.
A tropical disturbance was detected Friday in Mexico's Bay of
Campeche while a tropical wave was reported in the northern
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