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All Points Fall on Light Weather-Based Load

Prices declined, mostly by double digits, across the board Thursday as a relative lack of substantive cooling demand combined with the previous day's 7.1-cent dip in July futures to bring bearish pressure on the cash market.

Downturns ranged from about a nickel to the 20-cent area. Despite being one of the cooler market areas, the Midwest saw relatively small declines. Most of the larger losses were recorded at Northeast citygates; although New York City and Philadelphia were due to see Friday highs in the low 80s and upper 80s, respectively, most of New England will be in the low 70s or less.

The Energy Information Administration ignited a bearish Nymex reaction by reporting a 98 Bcf storage injection for the week ending June 17. July futures dived to a loss of 12.4 cents on the day after being near-flat prior to the report (see related story). The addition handily exceeded consensus expectations in the upper 80s Bcf area.

Citi Futures Perspective analyst Tim Evans said the larger-than-expected storage build "suggests a larger impact to the more moderate temperatures for last week than expected, and possibly the impact of a rising nuclear operating rate as well, compounding the reduction in utility demand for [gas as a] fuel."

The National Weather Service expects a wide swath of above-normal temperatures straddling the monthly transition. In its six- to 10-day forecast for the June 29-July 3 period the agency looks for above-normal readings between lines stretching from western Arizona to central North Dakota and from West Texas through South Carolina (excluding normal conditions along the Gulf Coast).

The announcement of a high-linepack OFO by SoCalGas (see Transportation Notes) caused prices to drop by a little more than 15 cents at both the Southern California border and the SoCal citygate. However, IntercontinentalExchange (ICE) said volumes traded on its platform rose from 524,000 MMBtu Wednesday to 680,400 MMBtu Thursday and from 410,400 MMBtu to 454,800 MMBtu at each point, respectively.

Transco's declaration of a systemwide Imbalance OFO starting Saturday came after cash trading had finished, but it undoubtedly will be a bearish influence on Friday's market in the Northeast and Southeast.

Cash numbers were already down Thursday before the storage report, resulting in intraday prices down 10-15 cents or so, said a Northeast marketer. That led him to expect numbers around $4.50 Friday for New England points such as Tennessee Zone 6 and the Algonquin citygate. There's almost no gas-fired power demand in the Northeast, and the Sable Offshore Energy Project is contributing to regional supplies again after an outage last week, he said.

It's a safe bet that the weekend factor, low weather demand and Thursday's screen loss will keep prices falling Friday, the marketer said.

A Rockies producer agreed that there's no doubt Friday prices will be softer again. He was a bit surprised that despite Thursday's declines, prices in his region were still holding up relatively well despite the plethora of cheap hydropower from the Pacific Northwest knocking out a lot of gas-fired generation. He noted that California prices continued to command a substantial premium to those at Henry Hub (the hub's average of about $4.30 was more than a dime less than those for the Southern California border and SoCal citygate, and about 30 cents under the PG&E citygate).

One thing that may be helping to insulate western prices from the abundant hydropower impact is that storage in the West Region is 114 Bcf below last year's level at this time, and Canada inventories are more than 100 Bcf less, the producer said. He added that he could "guarantee" more coal-to-gas switching by power utilities because of coal prices remaining at a premium.

A Midwest utility buyer said his company's loads are down because the "weather has been awful for a week or so...lots of rain!"

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