Amid rising concern about a potential price crash this summer because there likely will be little if any capacity left for storage injections, the cash market may have hinted at what is in store by plummeting across the board Friday.

Of course, the storage issue had some help in depressing quotes. Moderate mid-May temperatures were set to continue dominating the weather picture into the weekend; air conditioning load had diminished greatly in much of the South last week; the screen had fallen 25.1 cents Thursday in response to a bearish storage report and continued to dive Friday; and the drop in industrial demand that accompanies a weekend came into play.

The Friday declines ranged from a little less than 35 cents to about 75 cents; a majority exceeded half a dollar, and they were spread fairly evenly among geographic market areas.

With Friday’s steep descent, many points were approaching or exceeding dollar deficits to first-of-month indexes. All were more than 45 cents below index.

An accelerating futures slide makes a Monday cash price rally unlikely. June natural gas fell another 36.9 cents Friday and was joined in rout mode by Nymex’s petroleum product offerings after the International Energy Agency cut by 15% its estimate of the 2006 increase in global energy demand. Crude oil futures for June fell by more than a dollar to settle just above $72/bbl.

The Southern California border plunged by about 65 cents after SoCalGas declared a high-linepack OFO for Saturday (see Transportation Notes). Meanwhile on the other side of the U.S., Florida Gas Transmission lifted Friday an OFO-like restriction that had been implemented Tuesday due to low linepack and hot Florida weather. The Florida citygate racked up the day’s biggest loss.

A western consulting company said a number of its hedge fund clients were talking Friday morning about the notice by Southern Natural Gas saying that if current injection rates continue, its 60 Bcf of storage working gas capacity will be used up by the middle of the summer (see Daily GPI, May 12). It’s a big deal, the company said, and a significant confirmation of the storage problem that will occur this summer.

The desert Southwest, where temperatures were expected to surpass 100 degrees over the weekend, along with the torrid southern and western sections of Texas, are currently about the only sources of price-supportive weather conditions. There was anecdotal evidence of a bit of heating load emerging in northern market areas, as parts of Canada and the U.S. along the Canadian border have gotten chilly enough that some furnaces are getting fired up again, but obviously it was insufficient to avert steep price drops.

A Northeast marketer said an outage of Sable Offshore Energy Project processing facilities that was set to begin sometime Saturday (see Transportation Notes) and last through next Saturday was creating a bit of supply tightness in Maritimes & Northeast deliveries at Dracut, “but there’s plenty of other gas around,” so he didn’t see the outage as having a significant market impact. “There’s definitely some heating load” in the upper reaches of the Northeast, he said, but the resultant growth in gas demand was almost imperceptible.

The marketer said he didn’t see any possibility of a cash rally this week because there are just too many bearish influences piling up demand. The screen may be able to eke out an increase, though, especially if the petroleum product prices start going up again, he added.

He said he was not aware of any other storage operators that have announced the likelihood of full storage this summer as Southern did, but was sure that many of them are in similar situations.

A Midwestern LDC buyer said Northern Natural Gas is barring any additions to interruptible storage volumes that were already in place late last month; otherwise he also was unaware of any operator announcements about rapid storage refills. But assuming normal summer weather and little hurricane disruption of offshore production, he said he could easily envision a situation in another couple of months or so in which a lack of injection capacity might send the market tumbling as more and more supply finds it difficult to find a nonstorage home.

The buyer said temperatures had gotten a little colder in his area late last week, and his company could tell that “a few heaters were going on” when the thermometer got down around 40 degrees overnight. Thursday was “our biggest sales day of the month” so far, he said.

©Copyright 2006Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.