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Price Drops Tend to Be Larger Toward the East

Price Drops Tend to Be Larger Toward the East

The cash market split somewhat along geographical lines again Monday as overall softening grew greater going from West to East. Most Western points were flat to no more than 2-3 cents down, while Eastern declines mostly ranged from around a nickel to a dime.

Although a big winter storm dumped piles of snow from the nation's midsection through the Northeast over the weekend, by Monday's trading it already was getting ready to move beyond New England into the Atlantic. A trader said it was still very cold in the New York City area Monday-which may have helped explain why Transco Zone 6-NYC's drop of about 5 cents was among the mildest decline in the East-but that temperatures should start moving higher today.

A trader at the Southern California border thought the Southwest supply basins stayed strong because of balancing reasons, helping keep the border flat. That's the main reason western prices weren't dropping as much as in the East, he said. However, another source said PG&E's Diablo Canyon nuclear plant was coming back on-line and should be at full power by the end of this week, likely knocking out even more gas load in a region awash with plentiful hydropower.

"It was another quiet market with nothing really to push it in any direction," said an Oklahoma marketer. And a marketer in Calgary said, "Everyone's looking at the screen and wondering what happens next." The Henry Hub futures contract for April contributed to cash weakness with a fall of about a nickel.

Sources remained mostly bearish in their price outlook. With the storage overhang and upcoming warmer weather, no reason exists to buy gas, a marketer said. He doesn't expect the market slide to stop for the foreseeable future, saying only a major supply disruption such as a pipeline explosion could reverse the downtrend. Another trader said the falling prices are "long overdue, but I'm hesitant to say it will fall much further."

Commenting on the merger announcement Monday morning by El Paso Energy and Sonat Inc. (see story in this issue), a utility gas buyer quipped, "It looks like El Paso is trading one Southern for another." Last month there were reports that El Paso was in merger talks with electric utility firm Southern Co.; and Sonat is the parent company of Southern Natural Gas interstate pipeline.

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ISSN © 2577-9877 | ISSN © 1532-1231
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