Bullish Screen Defeats Bearish Weather to Push Cash Higher
The cash market switched gears Tuesday, as gains of 3 to 11
cents at most points reversed a two-day trend of general weakness.
A strengthening futures screen replaced the slackening power
generation demand as the main market driver, one trader said, and
the result was increasing gas prices despite moderating
temperatures throughout the nation.
While most other points registered gains, PG&E citygate and
Malin prices were held in check due to a high-inventory operational
flow order (OFO), issued yesterday morning (See transportation
notes). Malin traded flat to Monday and PG&E dropped into the
low $2.60s. Prices at the Southern California Border, however, rose
into the low $2.60s, virtually collapsing the basis between the two
California price points. Since the middle of May, PG&E has
traded at more than a 15 cent premium to the Border prices.
"This is usually a Saturday-Sunday type thing," one trader said,
but for this to happen for Wednesday flow "surprised everyone."
Northeast prices avoided a slide for the third day in a row
Tuesday, as M3 and Transco Zone 6 each rebounded into the low
$2.90s and high $2.80s respectively. One source said although
prices rebounded yesterday, Friday's and Monday's weakness in the
Northeast wreaked havoc on traders' performance to start this
"Power generation has changed the rules of summer gas trading up
here," one Northeast trader said. "We're seeing winter-like moves
in August, and power generation demand is behind the whole thing.
Many people locked in month-long contracts during bidweek,
expecting the prices to keep rising. That didn't happen and lots of
Northeast traders are getting bit because of it."
Yesterday's late screen push was the main reason for strong
prices at Sonat and Florida Zone 2, said one Southeast source. He
said Sonat traded in the low $2.60s, despite slackening power
generation demand thanks to temperatures that "only" reached the
Aeco prices were on the rise Tuesday, reaching as high as
C$/GJ3.10. One source attributed the increase to the burgeoning
accessibility to Aeco gas, because of the Northern Border
extension. "The strong price is an example of more options
available for Aeco gas," the trader said. "As a result, Aeco is
tracking much closer with the Nymex now than it had been before."
The American Gas Association's storage report was on the
forefront of many traders' minds yesterday, yet one source said
expectations may be too high. "The report will definitely be low,
but I think the bullishness may have already been expressed in the
form of the screen strength. I wouldn't be surprised if it has
little to no affect on the market's direction."
©Copyright 1999 Intelligence Press Inc. All rights reserved. The
preceding news report may not be republished or redistributed, in
whole or in part, in any form, without prior written consent of
Intelligence Press, Inc.