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Minor Rally at Most Locations Unlikely to Last

Getting an assist from the screen, moderately hot forecasts for much of the East and desert Southwest along with a patch of cold in the Rockies caused cash quotes to be flat to up by mostly small amounts at a large majority of points Thursday.

A few scattered losses from a couple of pennies to a little more than a nickel were at odds with overall numbers that ranged from flat to a little more than a dime higher. Most gains were no larger than about a nickel.

After giving a boost to Wednesday's cash market with a day-earlier gain of 9.2 cents, June futures returned to providing negative guidance by dropping 6.5 cents (see related story).

Pipeline/utility transport constraints were coming and going. SoCalGas is ending a high-linepack OFO Thursday, but its neighbor to the north, PG&E, was replacing that with its own high-inventory OFO (see Transportation Notes). IntercontinentalExchange (ICE) reported that the SoCal citygate was up nearly a dime, although volumes on the ICE platform dropped from 571,900 MMBtu Tuesday to 478,700 MMBtu Wednesday. The PG&E citygate was essentially flat, while ICE trading activity there dropped from 1,326,300 MMBtu to 1,187,100 MMBtu.

Meanwhile on the opposite coast, Florida Gas Transmission implemented an Overage Alert Day due to high temperatures in its Florida market area. This resulted in the Florida citygate seeing the day's largest increase, while production-area FGT numbers ranged from flat in Zone 1 to nearly a dime higher in Zone 3.

Although they are keeping an anxious eye on Mississippi River flooding, no pipelines in the south-central U.S. have reported any serious problems from it yet.

Hot conditions will keep air conditioning demand in play in the gas market for another day in the South, but cooling trends will start setting in Friday in the region's eastern end, and some parts west of the Mississippi River also will start seeing cooling trends by the weekend. Unseasonably warm weather in the Midwest also is on the verge of eroding, while mild conditions have already occupied the Northeast through much of the Mid-Atlantic.

Snow was still in the forecast for higher elevations of the Rockies, while sections of the desert Southwest can look for peak temperatures returning to the 90s going into the weekend. Otherwise, the rest of the West is dominated by moderate to cool weather.

A Texas-based marketer had no doubt that cash numbers will reverse direction again Thursday and head lower. Not only were futures softer, he said, but cash quotes were dropping in late trading Wednesday, which usually points out the trend for the succeeding day. Also, a lot of the weather-based cooling load that had been boosting the market will soon be disappearing, at least temporarily.

A Midwest utility buyer confirmed that although his area was seeing "blistering heat" early in the week, an approaching cold front would soon be erasing that. It was a rather uneventful market Wednesday with the utility's power generation demand starting to fade after showing some strength in the previous couple of days. He reported some Midcontinent pipes falling a nickel or so in late deals Wednesday.

A utility buyer in the South said temperature trends were similar in his company's service area: still hot for now but cooling to the 50s and 60s around the weekend. The Mississippi flooding had just begun to reach the general region, he added, but he was unaware of any damage to utility infrastructure or to pipelines serving it.

Tim Evans, a Citi Futures Perspective analyst, said his own prediction of a 73 Bcf storage injection for the week ending May 6 appeared to be close to a match with consensus expectations. Evans projects further builds of 95 Bcf, 113 Bcf and 112 Bcf in the weeks ending May 13, May 20 and May 27, respectively.

Evans also said in a Wednesday morning note that futures were slipping lower in early trading in reaction "to another 1,745 MW in nuclear plant capacity back online since a day ago." That was before Xcel Energy announced Wednesday that the 550 MW Unit 2 of its Prairie Island Nuclear Generating Plant near Red Wing, MN, was ramping up again following a weather-related automatic shutdown Monday (see Daily GPI, May 11).

Bentek Energy's U.S. Natural Gas Hub Flows chart may have presaged the price rebound at most points Wednesday in reporting that 11 of the 23 trading points covered in its chart recorded increases in nominated volumes for the day and another two were flat. Although only one of the gains was very big, with the PG&E citygate up 223,000 MMBtu (11%) from Tuesday, none of the losses exceeded 45,000 MMBtu.

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