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Prices Up Slightly, More So in Supply-Constrained West

Prices Up Slightly, More So in Supply-Constrained West

The cash market settled down to mostly small gains Tuesday, although quite a few points registered close to flat. The larger increases of a nickel or more were concentrated in California and the Permian Basin and on CIG, which played belated catch-up with other Rockies pipes by rising almost a dime.

Fundamentals had little to do with the modest firmness in the East, traders said. Instead it was more due to an increase of just over 3 cents in August futures and the ability of crude oil futures to finally surmount the $20/bbl hump Tuesday. An East Coast electric utility said it has been close to buying only gas for generation needs lately because fuel oil was uncompetitively expensive. However, loads related to warm weather will stay fairly light for at least a couple more days before temperatures start heating up around the weekend, said the utility's gas buyer.

Fundamentals came more strongly into play at western points. Although hot weather had eased enough that the California Independent System Operator (Cal-ISO) did not have to renew an electrical Stage One Emergency declaration issued Monday afternoon, enough heat remained in the West to keep power generators buying substantial amounts of gas. In addition, the outage of the Chaco Plant was still having its effect on constraining San Juan Basin supplies, and Rockies points reacted in sympathy with the San Juan shortfall. The variable cost of transport to move Rockies gas to El Paso's Blanco pool in San Juan Basin is about 5 cents, a marketer estimated. In addition, he said, a minor maintenance outage of the Big Piney Compressor Station behind the Opal Hub system was taking a small amount of Rockies gas off the market.

El Paso Field Services clarified the situation at its Chaco (NM) Plant. The plant, which had been yielding 450-460 MMcf/d recently at its tailgate, will remain totally down for maintenance through Thursday, a spokesman said. Then a lingering curtailment of about 60 MMcf/d will continue through July 22. However, EPFS is talking with producers about supplying enough extra gas to mitigate that 60 MMcf/d shortfall, the spokesman said.

The continued heat in the West helped pull up Waha prices to only a penny or two below Henry Hub and approximate parity with Katy, one trader said. However, rain and overcast skies in East Texas kept Houston Ship Channel numbers somewhat depressed to just above Henry Hub, he said.

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