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Aftermarket Strength Credited to Screen Run-Up
The April aftermarket got off to a running start with swingdeals being done Tuesday often 2-3 cents above bidweek averages,with a few points even stronger than that. Sources were virtuallyunanimous in attributing the cash strength to a further run-up onthe futures screen. In fact, traders were buzzing all day about thedizzying heights being hit by the May contract, often withquestions like, “What the heck is driving this thing?”
A thunderstorm-filled front moving eastward from theMidcontinent was leaving cooler temperatures in its wake andlending a bit of fundamental strength to prices. In addition, a lotof people finished up with their first-of-April swing businessMonday, resulting in a lot more buyers than sellers Tuesday, onesource said.
After seeing both cash and futures on the rise, a producermoaned, “I wish I hadn’t baseloaded anything now.”
One thing fueling both cash and futures price strength is an”extremely tight” supply situation, a Texas marketer said. Withprices like they are now, “what happens when the air conditionersreally get going and then along comes a few nuke outages and/or ahurricane?”
A Rockies trader who is bullish for the beginning of April butbearish for the end explained why he expects price firmness for awhile: NOVA line work is preventing about 150 MMcf/d from headingto California on PG&E-Northwest (formerly PGT), and PacificNorthwest electric rates are up to $6/Mwh higher today than onTuesday. A key factor in the power price hikes is less hydropowerbecause Bonneville Power Administration is storing water behindGrand Coulee Dam that will be needed for fish flushes (washing thehatchlings over the dam), he said.
However, an East Coast electric utility is shunning fossil fuelsentirely for now, relying on cheaper purchased power. The companyshut down its only gas-fired unit in February due to high gasprices, the fuel buyer said. And if generation load gets highenough, fuel oil would definitely be the preference over gasbecause of low crude prices, he added.
Northern Natural-demarc popped up quickly to $2.29 and beforeyou knew it ANR-Southwest and NGPL-Midcontinent had to follow, amarketer said. It seemed there were some balancing issues for April1 that had people scrambling for gas, he said.
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