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Price Increases Get Larger at Most Points

Despite a mini-heat wave in the Midwest proving to be short-lived, the cash market found enough support from the previous day's futures spike and remaining high temperatures in much of the East to realize further gains at nearly all points Friday.

The weekend drop of industrial load obviously had minimal price impact as the upticks -- primarily driven by Thursday's futures strength -- had gotten larger in general and were starting to reach double digits in a few cases.

A couple of small losses of 3-5 cents or so were the only exceptions to quotes ranging from flat to nearly 15 cents higher. A large majority of the gains, distributed fairly evenly among market areas, were in single digits.

After providing support to cash numbers with a 16.5-cent increase Thursday, the screen has negative guidance for Monday's physical trading as July futures fell 8.7 cents Friday (see related story).

The remnants of a small low-pressure area that passed over northern Florida Wednesday evening and entered the central Gulf of Mexico Thursday had moved to about 275 miles east-southeast of Brownsville, TX, without causing any reported shut-ins of Gulf of Mexico production. The National Hurricane Center said Friday the system had near-zero chances of development into a tropical cyclone. Another low-pressure area was several hundred miles south of Jamaica Friday afternoon, but the agency only gave it 20% odds of becoming a named storm.

The Louisiana Department of Natural Resources said that as of Thursday there was a small reduction of reported oil shut-ins in the flooded Atchafalaya Basin from the day before but no change in the 31.54 MMcf/d of curtailed gas production.

An excursion into hot weather for some parts of the Midwest proved to be short-lived. Weather Central said the Chicago area, which reached about 90 Friday, was due to stay warm but sink back into the low to mid 80s Saturday.

Not so in the South, where highs in the 90s would continue their reign, with a couple of locations -- Memphis, TN, and Montgomery, AL -- anticipated to hit the century mark on the thermometer Saturday, according to Weather Central. The Northeast was a mixed weather bag, with some sections getting slightly cooler while others were due to warm a bit, creating an overall forecast of little change from moderately warm to cool.

Rockies temperatures were rising, with its major consumption area of Denver expected to hit 90 Sunday, according to Kern River's AccuWeather.com-supplied forecasts. But except for highs starting to exceed 100 in parts of the desert Southwest such as Phoenix, the key description of most weather remained mild to chilly.

SoCalGas sent e-mail notices Friday morning of a high-linepack OFO for that day that was extended into at least Saturday (see Transportation Notes). The impact on the SoCal citygate was essentially negligible, though, as IntercontinentalExchange reported flat pricing there and volumes traded on its online platform rising from 376,200 MMBtu Thursday to 438,800 MMBtu Friday.

Southern said based on current supplies and anticipated demand, it expected storage injection requirements to exceed its capability by about 250,000 Dth/d Saturday and Sunday. The pipeline said Friday afternoon it was "too close to call" on whether a Type 6 OFO might be declared for either gas day.

Despite the futures downturn Friday, a Texas-based marketer said prices should stay strong Monday due mainly to hot weather continuing in much of the East. Other than selling a lot of gas to meet power generation demand, it's a pretty quiet market for now with no significant transportation issues, he added.

A utility buyer in the South said it had been hot in the company's service area earlier, but since Memorial Day it had gotten "very hot." However, he said, the Tennessee Valley Authority appeared to be holding off for now on running a number of gas-fired combustion turbines in the general region. He agreed with the marketer that market activity was pretty routine at that point, with his utility mainly aimed at meeting its storage injection targets.

A western trader said there was some tightness delivering gas into the PG&E market because of a Baja Path capacity constraint, but it's the typical time of year for such maintenance, "so we plan for it." Conditions are unusually cold in much of the West at this time, he noted. He expects to pick up a lot of cheap gas this summer from the big surplus of hydropower coming on and said he was wondering to whom Ruby Pipeline shippers will be selling gas when the system is scheduled for startup next month.

The Baker Hughes Rotary Rig Count reported an addition of six rigs engaged in gas-directed activity to 887 for the week ending June 3. A one-rig decline in the Gulf of Mexico was more than offset by an onshore increase of seven, Baker Hughes said. Its latest tally remained flat from a month earlier but was down 6% from the year-ago level.

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