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Cash Creeps Higher Amid Futures Action

Cash Creeps Higher Amid Futures Action

Most cash points rose 1 to 5 cents yesterday on the strength of a futures rally fired by a bullish American Gas Association storage report. Traders were in agreement that prices were flat to Wednesday until the futures screen picked up in the late morning.

"If you traded early, you could get flat prices, but once the futures screen started rolling, both the Gulf Coast and the Northeast moved upward hand-in-hand," a Northeast buyer said, adding that Transco Zone 6 (NY) recovered from Wednesday's drop to trade in the low $2.90s Thursday. The Henry Hub finished in the high $2.60s, while the Tennessee 500 and 800 lines traded around the $2.60 level.

The western market "remained a dog," one trader said, because of very lackluster trading activity. The Southern California Border traded at only a dime premium to El Paso Permian. She added that electricity prices did not do much better and it is almost to the point where it is not economical to use gas for generation.

" If you take a California Border price of $2.65, and add 50 cents to get it to the burnertip, you would have to sell your electricity for $31.50 MW. However, clearing prices on the California PX for tomorrow are only $26.50 MWh," she said.

A capacity constraint on Northwest's system caused Sumas to weaken by a penny or two Wednesday, a Rockies trader said. In contrast, Blanco stayed flat in the low $2.30s. "Loads north of Sumas have been small lately, and people are over-nominating," the trader explained. He added that Sumas prices should start rising next week, because of the planned maintenance of BC Gas' West Coast system, which should withhold 450,000 Dth/d. "This yearly maintenance not only will raise Sumas prices in the middle of the month, it also was responsible for Sumas' August index to be higher than it should be," he said.

A Midcontinent trader said utilities were very active in the spot market Thursday because they avoided long positions when prices were strong during the last bidweek. He also pointed to the start of the harvest season and the firing up of agricultural processing plants as another reason for Midcontinent pipes gaining up to a nickel.

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