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Demand for Storage Gas Pushes Prices Higher

Demand for Storage Gas Pushes Prices Higher

The rebound from Monday's price downturn bounced high above the rim Tuesday as many price points experienced gains well over a nickel. The upticks were attributed to a rise in the futures market late Monday afternoon and early evening, and a growing inclination to buy gas for storage now before prices rise further.

Gains were highest in the Northeast with Columbia and CNG trading in the high $2.30s. New York citygates registered similar advances into the low to mid $2.40s. One Northeast trader said the rise was caused by traders buying gas to put in the ground. "There is greater demand for storage gas as fields that have been resting between the withdrawal and injection cycles are now coming back up."

In a turn-around that many would have believed unthinkable earlier this year, the trader added another factor pushing prices upward is that oil has recovered to the point where industrials are finding it economic to switch to gas. "Because of the precipitous rise in crude oil and related products, we are starting to see some fuel switching from heating oil to natural gas in the Northeast."

Prices recovered somewhat in the Midwest after experiencing losses between 4 and 12 cents Monday. One marketer said the Midcontinent's Tuesday recovery, which ranged between 3 and 7 cents, was related to last summer's experience when Chicago prices peaked in the $2.40s and $2.50s in June and July. "There is a sense of urgency to put as much gas into the ground now before prices get too high."

Downed Texas nuclear plants (See Daily GPI, April 8), along with temperatures that reached the 80 degree level for much of West Texas, southern New Mexico and southern Arizona, helped prices stay strong at many of the southern points, a Texas trader said. Waha traded in the $2.08-12 range and Katy traded in the mid teens, representing a rise of more than 6 cents for each point from Monday's averages.

"Although those nukes are scheduled to be back in service at the end of the month, people are buying all the gas they can to make up for them. This is still the cheapest month to buy gas, so many people are doing so."

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