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Slight Break in Heat Allows Prices to Level Off

Slight Break in Heat Allows Prices to Level Off

The furious upward rush of swing cash prices finally ran out of steam Tuesday, leaving most of the market in a consolidation and stabilization mode. Except for a nickel rise in Transco's Zone 6-NYC pool and milder increases on several Midcontinent pipes, flat numbers were the order of the day at nearly all eastern points. Although the Midwest and Northeast market areas had cooled off a bit since Monday, forecasts for a heat wave to re-intensify later this week kept prices from retreating, a marketer said.

"I've got to get used to saying 'three' instead of 'two' [in the dollar place]," said a buyer after erroneously reading a Transco Zone 6-NYC quote. Although Zone 6 non-NYC and Texas Eastern M-3 remained below $3, most quotes for the NYC pool were solidly over $3.

Meanwhile, moderate softness dominated western markets. A small decline at the PG&E citygate combined with a small rise at the Southern California border to bring the two points just over a nickel apart, compared to a more normal gap of about 15 cents, one trader noted. "Essentially what that means is that San Francisco is very comfortable [and cool] compared to Los Angeles," he said.

A dropoff in swing activity was evident as many sources had already either baseloaded various points for the rest of July or continued to clear the decks for bidweek business.

A producer quoting Houston Ship Channel basis at plus 1.25-1.5 said intrastate Texas basis is "very weak compared to the intrastates." He sees no reason at all to question the recent run-up in August futures. "Some people may try to deny it, but there's just not as much supply out there as there used to be," the producer said. "Just think, last December we had a 700 Bcf year-to-year overhang in storage. Now we've worked that off and are in deficit." That's why the Nymex contract is so strong, he concluded.

A couple of sources said Malin was trading in the upper $2.20s for August. One was hearing PG&E citygates around $2.61 and said the Southern California border is about a dime below that. Another trader pegged border basis at plus 1-3 and said the border, San Juan-Blanco and Permian were all trading at a slight premium (less than a penny) over index.

The modest premium in index deals was in effect in the Midcontinent also, according to a marketer who said the Midcontinent pipes in general and Chicago citygates were being bid at index plus 0.25 and asked at plus 0.75.

Other basis talk Tuesday included: Transco Zone 6-NYC at plus 27-28; Texas Eastern M-3 at plus 25; Transco Station 65 at plus 0.5-1; Chicago at plus 6-6.5; ANR-Southwest, Panhandle Eastern and NGPL-Midcontinent pool all at minus 10-11; and Northern Natural-demarc and Ventura at minus 8-9.

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