Cash Market Goes Into Anticipated Swoon
Prices failed to fake out anyone Wednesday. With Tuesday's late
softness on the Nymex screen carrying over into Wednesday and the
subsidence of "the big bakeoff" in the Northeast, as one producer
called it, it didn't take a crystal ball to make a bear market
call. The larger declines on either side of a dime tended to
cluster in the Gulf Coast, Appalachian, Northeast, Midcontinent and
Midwest markets, while western drops generally were around a nickel
or less. Unlike the late screen-related fallbacks reported Tuesday,
traders said a number of points saw slight upticks in late deals
Everything has pretty well calmed down in the Northeast
following a Tuesday in which many of the region's electric
utilities set records for daily power sendout, a marketer said. She
was unaware of any that were still under voltage restrictions or
appealing to customers for energy conservation Wednesday. The
easing of the heat strain was reflected in new PJM
[Pennsylvania-New Jersey-Maryland plus Delaware] Interconnection
prices for next-day transmission being reported in the $40s/MWh
compared to well over $100 the day before.
A Midcontinent marketer was glad to see gas prices falling,
saying his company had gone into July in a moderately short supply
position. A Midcontinent producer wasn't so glad about the
downturn, but he said the market started the day with most pipes in
the area being bid as low as $2.08 while offers were at $2.13. Many
transactions, particularly on Panhandle Eastern, were closed at
$2.10-12 between 9 and 9:30 a.m. CDT, he said. After prices began
to climb in the late going, he was able to sell gas at Northern
Natural's demarcation point for $2.18.
Most sources were in consensus that there's little reason to
look for any price turnaround before next week, if then. They
pointed to forecasts for moderating weather and, while disagreeing
on whether the AGA storage injection figure of 69 Bcf was a little
lower or a little higher than expectations, essentially ruled it
out as a significant market factor.
A Midcontinent trader, noting that his Chicago citygate quote of
$2.20 was already 13 cents below the first-of-month index, found
more reasons for a bearish outlook. It's the storage injection
season, he said, yet it seems like hardly anyone is injecting gas.
He also cited history: "If you look at Midcontinent prices last
year, they entered July in the $2.30s and exited in the $1.90s.
That could very well happen again. This is the time of year when
things really fall off." The trader said he does business with
power generation plants and is getting more sell calls from them
than buy calls. One plant is operating at only 20% of its gas burn
capacity, he said.
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