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Screen Rests, But Cash Market Remains on Fire

Screen Rests, But Cash Market Remains on Fire

The screen may have decided to take a breather Monday after flexing its muscles so impressively last week, but the heated cash market showed no signs of settling down. Western quotes staged their by-now-familiar retaking of ground lost over the weekend, and this time they actually shared in the general bull market by rising in greater amounts than they had fallen on the previous Friday. Eastern points, on the other hand, continued to build on the upward trend they had seen all of last week.

Just gazing at new eastern price quotes, many traders likely would have guessed the market was in the middle of a colder-than-normal winter rather than the dog days of summer. Transco Zone 6-NYC quotes actually peeked over into $3-plus territory Monday. Continued price hikes were very much a power generation play, sources agreed. The heat wave dominating most U.S. weather outside the near-shore Pacific coast was not causing emergencies but still pushed power generation capacity to the utmost.

Chicago citygates started strong in the $2.60s but fell back later, a marketer said. He perceived the retreat as caused by people withdrawing storage gas to sell into such a strong market. But a producer saw the storage withdrawal strategy as "kind of like robbing Peter to pay Paul. You've got to put back that storage eventually, so do you pay up now or pay up later?"

The market area was much stronger than the Gulf Coast, said a Northeast-oriented marketer. However, valve replacement work on Transco should end by midweek, she said, and that will open some extra IT at the Linden, NJ constraint point.

Although double-digit increases dominated all markets, the largest ones occurred in the West, led by a San Juan Basin rebound of more than 30 cents. Pacific Gas & Electric, after surprising traders with the absence of a high-inventory OFO Saturday, fulfilled their expectations with one Sunday but did not continue it Monday.

Power generation is obviously driving the swing market, a Midcontinent producer noted, and because the high temperatures are expected to last through Friday, that should create strong bidweek trading. "After that, who knows?" he asked rhetorically. The producer reported August basis at minus 9.75-10.75 for Panhandle Eastern and NGPL-Midcontinent slightly weaker at minus 10.75-11.75. A marketer pegged Michigan citygate basis at plus 7.5 for Consumers Energy and plus 8-8.5 for MichCon. He saw Chicago at plus 6.5-6.75, but another source said that while Chicago had been plus 6.5 earlier, he perceived it as tightening a bit to plus 6 Monday. Other basis talk included Niagara at plus 7, Columbia Gulf-onshore at minus 2.25, TGT Zone SL at minus 1.5-1.75 and Columbia-Appalachia at plus 14.5-14.75.

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