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Mild Price Softness Seen as Relatively Strong

Mild Price Softness Seen as Relatively Strong

It didn't surprise any traders when the cash market was the teensiest bit softer Wednesday. What did prompt some expressions of amazement was that prices held up as strongly as they did. Between a falling futures screen and overall weaker demand fundamentals, it seemed that prices should have dropped at least a nickel or more, one source said. Instead, few points were down more than a couple of pennies, and some registered flat showings. Northern Natural Gas, serving a market area with near-winter-like chill, even managed small gains.

The market "felt" strong even if prices fell slightly, a marketer said. He reported robust demand from Midwest utilities, where a cold front was moving into the region. Chicago and Michigan citygates were among the points showing little or no decline.

South Texas prices, especially at Agua Dulce, are being hurt by the total shut-in of Zone 1 on Florida Gas Transmission, a trader said. "We're having to replace all the MOPS (Matagorda Offshore Pipeline System) gas we were selling" into FGT-Zone 1, he said. "Luckily we have only one more day to put up with it," as the Zone 1 maintenance outage will end Friday. Another source reckoned the outage as worth at least an extra penny in Zones 2 and 3. FGT-Zone 3 normally trades about a penny below Henry Hub but currently is at flat basis, he said. And Zone 2, normally flat to the Hub, now has a penny premium, he added.

Wednesday's early pricing was influenced slightly lower by the softness in Tuesday evening Access futures trading, according to one marketer. She felt that further futures losses in regular trading Wednesday forebodes still-weaker cash numbers today.

The Rockies was one of the rare markets with several pipes off by more than 2 cents. Expect similar softness to continue as the West shakes off more and more of last week's chilly weather, a marketer said. Another source essentially seconded that emotion, saying hydropower should be kicking in much more strongly in western energy markets within the next week or two. The reports he was hearing said hydropower should be at least as plentiful as it was last spring.

Intra-Alberta quotes were flat in the C$2.54 area, a Calgary trader said. Processing plant turnarounds in the province should be increasing before the end of April, she said, so the resultant supply constraints likely will provide some late-month support for prices.

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