Physical natural gas for the extended holiday weekend skidded as more moderate declines in Texas and Louisiana were incapable of offsetting significantly bigger drops in the Rockies, California, and the Northeast.

The NGI National Spot Gas Average fell 10 cents to $2.51, although futures continued higher, coming within a half cent of $3. At the close August was up 6.3 cents to $2.987 after trading as high as $2.995 and September had advanced 6.3 cents as well to $2.981. August crude oil rose 66 cents to $48.99/bbl.

Market observers are scratching their heads and asking, “Why haven’t higher prices loosened the market after a $.70 cent rally?” said industry consultant Genscape. “The short answer is that, while gas is in fact ceding market share back to coal, nuclear and hydro have gone from being much above normal in April and May to below normal in June, which is increasing the call on thermal generation (both gas and coal) and partially offsetting the reduction in gas burn vs coal.

“Higher gas prices are indeed having an impact, and coal generation has indeed risen more sharply than gas in the last few weeks. Comparing week ending June 23 versus the week ending May 26, coal generation is up nearly 50 average Gigawatt Hours, while gas generation is up 37 (5 average gigawatts of gas generation equates to nearly 1 Bcf/d of gas burn).

“Power is not the only factor keeping the market tight as production has been declining in absolute terms and even more quickly versus the five-year average,” Genscape said.

There wasn’t much market tightness in play Friday, especially in market points delivering gas to California and the West Coast. Forecasts of falling temperatures and soft power pricing were enough to pull the plug on a number of locations. Forecaster Wunderground.com reported that Friday’s expected high in Los Angeles of 80 was seen sagging to 76 Saturday and 74 Monday, right at the seasonal average. Normally toasty Burbank, CA, was predicted to see its Friday high of 84 slide to 82 Saturday and rise to 84 Monday, also the seasonal norm.

Gas on Malin fell 19 cents to $2.49 for the long holiday weekend, and gas at Opal retreated 15 cents to $2.51. Gas on Kern Delivery shed 18 cents to $2.66, and packages on El Paso S. Mainline/N. Baja changed hands 11 cents lower at $2.73.

Intercontinental Exchange reported that power for delivery Tuesday at SP-15 fell 89 cents to $36.61/MWh.

Other market points were soft as well. Gas at the Algonquin Citygate fell 35 cents to $2.34, and deliveries to the Chicago Citygate gave up 6 cents to $2.74. Parcels at the Henry Hub were quoted at $2.87, down 3 cents, and gas on Transwestern San Juan fell 13 cents to $2.55. Gas priced at the SoCal Citygate dropped 23 cents to $2.69.

Analysts see a market ready to push through $3. “Although this market was unable to post fresh highs overnight, its ability to push above [Thursday’s] peak suggests a bull market that is very much alive and apt to realize a $3 price handle next week,” said Jim Ritterbusch of Ritterbusch and Associates in Friday morning comments to clients.

“The short-term temperature views remain tilted bullish with above normal temperatures extended out toward end of month, according to most forecasts. However, deviations from normal don’t appear appreciable across the northern half of the U.S., and this is precluding strong upside follow-through at the present time.

“Nonetheless, the cash market at Henry Hub appears well supported despite the fact that industrial demand will be downsized in conjunction with the upcoming three-day holiday period. This comparatively strong cash basis is likely to keep the front August-September switch inverted in providing a significant bullish portent in our opinion. Furthermore, this market may still need to price in another sharply downsized 40-50 injection in next week’s EIA report as a result of this week’s warm temperatures and disrupted supply out of a major gas processing plant.”

Others aren’t so sure about a sustained push through $3 any time soon. Traders saw Thursday’s six-cent advance as impressive and said, “It has a shot a $3, but that is a tough, tough area. Did you see what happened in the crude oil? As soon as it hit $50 [Wednesday] it came off 18 cents. $50 was such a benchmark for crude oil and that is the way traders are going to look at $3 natural gas,” said a New York floor trader.”

Gas buyers for power generation over the weekend across the PJM footprint should be faced with less of a challenge as temperatures are expected to moderate, but wind generation is also expected to lessen. Forecaster WSI Corp. said, “high temps will range in the upper 70s and 80s along with mins in the mid 50s, 60s to near 70. A residual frontal boundary and ripple of low pressure will be a focal point for rain and thunderstorm activity during Sunday night into early next week. Wet weather will continue suppress temperatures.

“The cold front passage will boost wind generation today into Saturday morning, but output will only top out around 2 GW range. Wind gen will relax and become light during the remainder of the period.”

Longer term, WSI is looking for a cooler West and warmer East. “Above average period anomalies are expected across much of the central and eastern U.S. during the six-10 day period. Period anomalies will range closer to, if not a tad below, average over the West. [Friday’s] forecast is a bit warmer over the eastern half of the nation and cooler over the western half. As a result, CONUS PWCDDs are up 0.7 to 69.8 for the period.”

In order to better reflect ever-changing physical market dynamics NGI, as previously announced in a June 1 Price Notice, has added two new regions to the gas price index tables in its newsletters, along with two new price points. As of July 1, NGI has split the existing Northeast section into separate Northeast and Appalachia regions; initiated a new Southeast region, which is a combination of the original Alabama/Mississippi and Florida regions; and created separate Transco Zone 5 North and South prices, while continuing to publish combined Transco Zone 5 prices.