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Most Points Ease, But Marcellus Rebounds; Futures Flirt With $4

Physical gas for Wednesday delivery was mixed with broad, yet modest, declines at most points offset by some nominal strength in California and a rebounding Marcellus. Eastern points lost by double digits as temperatures struggled to make it to normal readings, and losses of a few pennies were common in the Gulf, Great Lakes and Midcontinent.

Futures traders on Tuesday saw little movement as well. September rose by 0.9 cent to $3.974, and October gained 1.3 cents to $4.001. September crude oil shed 71 cents to $97.37/bbl.

Weather patterns at eastern points continued to be less than supportive and the absence of summer warmth has caught a number of peoples' attention. According to AccuWeather.com meteorologist Brian Edwards, "2014 has featured a wet and cooler-than-average summer across a wide swath of the country from the central Plains to the mid-Atlantic, including the Northeast and Great Lakes. As children get ready to go back to school, some people are asking where all the summer warmth was and why was it so cool and wet? Even though it's been cooler than average in many locations, AccuWeather.com meteorologists are still expecting a stretch of above-normal warmth across the Midwest and East during the latter part of August.

"A wet weather pattern will persist across much of the East during the first part of this week. There is even a threat for widespread flash flooding, [but] behind this flash flood potential, cooler, below-average air will slide from the Midwest into the mid-Atlantic and Northeast, keeping the warm weather confined to the Deep South for now.

"The Bermuda High will help to bring much warmer air from the central Plains to the East with the highest above-normal departures from the Ohio Valley to the interior Northeast. This is expected to begin around Aug. 20.

"Some cities, like New York City, could end up as much as 10 degrees above normal during the stretch of days from Aug. 20-23. Keeping in mind that NYC's normal high is in the lower 80s, departures to this magnitude could mean a several-day stretch of 90 degree weather."

For the moment, 90 degree weather is nowhere to be seen. AccuWeather.com forecast that Tuesday's high of 79 in New York will rise to just 80 by Wednesday and slip to 79 on Thursday. The normal high in New York this time of year is 83. Philadelphia's Tuesday high of 75 was expected to make it to 83 Wednesday before easing back to 80 on Thursday. The seasonal high in Philadelphia is 86. Baltimore's 74 high on Tuesday was seen rising to 83 Wednesday and also falling back to 80 on Thursday. The normal mid-August high in Baltimore is 86.

Power generators across the PJM region were expecting mild conditions and increased wind output. WSI Corp. in its Tuesday morning forecast said, "A complex frontal system will traverse the power pool [Tuesday] and tonight with rounds of heavy rain and thunderstorms, which may be locally strong. Rainfall amounts may range one to two inches-plus. High pressure is expected to slide into the region in wake of the aforementioned system during the middle to end of the week. This will lead to generally fair and comfortable conditions, though a few pop-up showers cannot be ruled out. Fair and warmer conditions are possible across much of the power pool by the start of the weekend, though there is a chance of showers/storms across ComEd and far northwest areas.

"The frontal system will support a period of elevated wind generation during the next couple of days. Total output may top out over 2 GW at times. Wind generation is expected to decrease and become light during the end of the week. The recent and expected wet weather will likely provide a boost to stream flow and hydro prospects this week."

Quotes at Algonquin Citygates fell 31 cents to average $2.68, and deliveries to Iroquois Waddington were flat at $3.82. Gas on Millennium shed 20 cents to $2.35.

Gas headed for New York City on Transco Zone 6 dropped 30 cents to $2.62, and gas on Tetco M-3 fell by 23 cents to $2.59.

Prices at Marcellus points rebounded from sub-$1 levels as pipeline restrictions eased at a major pipeline interconnect. Tennessee Gas Pipeline (TGP) reported that at the interconnect with Algonquin Gas Transmission scheduled nominations dropped sharply leaving over 400,000 Dth of available capacity that was not available Monday. At the Mahwah interconnect 934,146 Dth is the operating capacity and 504,468 Dth was reported scheduled leaving 429,678 Dth available. On Monday 933,653 Dth was scheduled leaving just 493 Dth available.

Gas on Transco-Leidy Line gained 40 cents to $2.15, and deliveries on Tennessee Zone 4 Marcellus added $1.48 to $2.08.

West Coast points were steady to slightly in the black. At Malin, next-day gas was unchanged at $3.88 and deliveries to PG&E Citygate were also flat at $4.56. At the SoCal Citygates Wednesday gas came in at $4.49, up a penny, but parcels at SoCal Border were higher by 2 cents to $4.22. Gas on El Paso S Mainline rose by 2 cents to $4.38.

Top traders see weather patterns trending to less-elevated injection patterns by next week. "Expectations across next week are generally favoring above-normal trends that will be covering virtually the entire eastern half of the U.S. These warmer temps could bring a near halt to the dramatic contraction in the supply deficit that has been evolving across this summer," said Jim Ritterbusch in closing comments Monday to clients.

"While we look for Thursday to indicate another strong build of 76 Bcf that would compare with a five-year average hike of 45 Bcf, it would appear that the last EIA [Energy Information Administration] release of this month could be appreciably downsized toward more normal injections. Nonetheless, this market is showing signs of waffling just below the $4 mark as large institutional accounts appear selective in exiting short positions acquired during the past several weeks. But should warmer temperature forecasts begin to stretch into next month, we see further upside to about the $4.08 level. Despite today's inability to follow through to the upside, the chart improvement established via [Monday's] highest levels in almost three weeks will likely be keeping speculative shorts in a defensive posture with a strong run up likely on any bullish miss within Thursday's EIA data."

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