Following the example set forth by the natural gas futures market, cash prices started strong Tuesday only to fizzle late in the morning as an unimpressive tropical storm brought spring rains and cooling temperatures to the Gulf and southeastern states. Tropical Storm Allison, the first tropical storm of the season, formed yesterday in the northwestern Gulf of Mexico but did little to slow the late declines in both cash and futures markets. Although prices at many locations were up initially yesterday, and posted average daily increases of a dime or more in some locations, sources agreed those prices will come under downward pressure today.

All eyes turned to the Gulf yesterday afternoon as Allison formed and was poised to wreak havoc on the coast. But the storm posed little or no threat to producing platforms and appeared more likely to lower cooling demand in the region over the next day or two. The tropical storm formed about 80 miles south-southeast of Galveston, TX, with sustained winds near 60 mph. At 4 p.m. it was moving toward the north near 13 mph, and tropical storm warnings were issued for the Texas and Louisiana Gulf Coasts from Sargent, TX, to Morgan City, LA. The tropical storm was expected to move inland over southeastern Texas and southwestern Louisiana yesterday evening, bringing strong gusty winds, heavy rainfall of five to six inches and coastal storm surge flooding of two to four feet above normal tide level.

“The storm fizzled out to be nothing but a heavy rain shower,” said one Gulf Coast region trader late in the afternoon. “Couple all that together with your AGA number, which is expected to be pretty high again, and it all points to very bearish signs. The market is soft, soft, soft. It is definitely a Charmin market.”

Texas temperatures cooled a few degrees from Monday so there was less buying by utilities. “It’s a lot milder in East Texas because rain cooled things off. Entergy and HL&P weren’t out buying. I don’t think TXU did either. CP&L bought a little bit.”

“All the nukes are running pretty good,” said another Texas marketer. “But temperatures are expected to escalate as the week goes on. By the end of the week Dallas’ forecast is in the mid-90s, and when they hit 92 degrees their load grows exponentially.”

Most western prices were fairly flat. Waha ranged between $3.98 and $4.05, said one trader, which was basically flat to Monday. Permian fell to the low $3.90s but came back up. San Juan prices, which gained more than 20 cents, were the exception, he added. “I don’t know if people are playing the maintenance game out there or what. It’s going to be a long month for people in the San Juan because of the maintenance El Paso always does in June out there.” El Paso has a series of maintenance programs in the San Juan this month that will restrict capacity and decrease gas flows and transportation options (see Transportation Notes).

California border into SoCal prices remained in the low $9, he added. “Basis was off today by more than 70-80 cents to around $5. California was weak, but not as weak as it was going into the weekend. If it goes down much more, we’ll be buyers because we have storage out there.”

“Malin was ugly,” said a western marketer. “There was extremely low demand at the PG&E Citygate. So much gas is flooding the citygate, and it is difficult to move it off system into SoCal,” he added. “With such a narrow spread between citygate and Permian, it made more sense to sell your gas in the basin and buy citygate rather than try and move the gas. That spread has collapsed in just a week. During bidweek, that spread averaged more than $5.50. Now it is down to pennies. Although I don’t personally know of anyone who was clairvoyant enough to have pulled the trigger on this one, the SoCal Border-PG&E Citygate spread trading at just $2.16 during bidweek, would have been a nice purchase. Now that spread is trading at $4.00-plus making those long the spread a ton of money.”

On the other side of the country, prices mainly followed the screen, crashing hard in late trading. “We did Transco non-New York at $4.25 and New York at $4.32, but those were done early. Non-New York traded down to $4.11 and New York traded to about $4.18 maybe even lower,” said an LDC buyer. “It followed the Gulf Coast down and the Gulf followed the screen, which just got crushed. There’s nothing really driving prices right now besides Nymex. The pipes are looking a little packed up. Storage has filled at a pretty healthy clip. Things are definitely looking weak today.” He said he expects the weekly storage injection to come be on the high end of an 85-115 Bcf range.

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