In quiet trading for the Independence Day weekend, prices fell at nearly all points Friday, with a few cases of flat to slightly higher numbers interspersed. Losses ranged from a couple of pennies to about 40 cents.
The overall softness was hardly surprising in light of the longer weekend's greater loss of industrial demand, dropping cooling load in northern market areas and the previous day's dime-plus screen drop. What did surprise a couple of sources was that softening wasn't more pronounced in the Gulf Coast, Midcontinent and Appalachia, which is where the smallest drops, flatness and small upticks tended to congregate.
Prospects for a post-holiday rally in the cash market are good. Hotter temperatures are expected to be returning to the Midwest and Northeast as the weekend comes to a close, and August futures turned in a strong performance Friday with a 19-cent increase. The natural gas contract may have been hitching its wagon to the oil spike. Crude for August delivery shot up more than $2 to $58.75/bbl as traders eschewed going home for an extended weekend in short positions.
The Northeast, where a cold front was due to usher in delightful weather for the Saturday-Monday period, and the West, where another cold front moving eastward out of the Pacific Northwest would leave below average temperatures in its wake, recorded the biggest declines. Western markets also continued to wrestle with excess supply problems. PG&E issued a high-linepack OFO, and while SoCalGas took the unusual step of waiting until afternoon to issue its own OFO, it had earlier told shippers to be alert for the possibility of one (see Transportation Notes).
Prior to the SoCalGas OFO announcement, a marketer said that from the wording of a posting about a reduction in Transwestern receipts Friday, she wasn't sure whether the notice constituted an official OFO declaration, "but we'll be prepared for one anyway."
"It's beautiful weather here" and should stay that way over the weekend, said a marketer in the Lower Midwest. However, temperatures should start to heat back up again to around 90 degrees Tuesday, he added. Although prices came off, it was a stronger cash market than he had expected. "The Fourth of July weekend is always a very low-demand period," he noted.
The marketer said his company would have liked prices to get even softer than they actually did. Quotes stayed stable for most of the morning, he said, adding that the screen strength raised a few late prices, but most trading had already been completed by then. The marketer reported that several of his trading coworkers had remarked on a noticeable downturn in trading activity Friday. "Real quiet" was how one described it, he said.
A Gulf Coast producer also perceived a quiet, slow market, but said that could have been expected with a bidweek having been just completed and people in a rush to finish early and leave for the holiday weekend. He said he'd expected Gulf Coast-Northeast basis spreads to be weak, as they were, but didn't figure on Gulf prices holding up as relatively strongly as they did. Heat across the South apparently limited Gulf Coast softness, he said, noting that his company transports most of its gas to Northeast markets, "and what's left over we sell in the Gulf Coast."
Variable costs of Transco transport to the Northeast was working Friday, the producer went on, but not on Tennessee or Texas Eastern. He said the market area was due to enjoy a pleasant holiday weekend following a stormy Friday evening.
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