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Price Hikes Backed by Futures, Supply Tightness

Price Hikes Backed by Futures, Supply Tightness

The cash market resumed its climb Thursday, buoyed by a rising Henry Hub futures contract, a tightening supply situation, spreading cold weather and air conditioning load from Texas through the Southeast. A "lean" storage report Wednesday afternoon added to bullish sentiment, a marketer said.

Broad-based gains were scattered between a nickel and a dime. The surge left only a few Pacific Northwest and Rockies quotes still under the $2 level. A cold front that had chilled the Rockies on Wednesday was moving into the Upper Midwest Thursday, resulting in upticks of close to a dime at many Midcontinent field and Midwest citygate points.

Tightness of supplies in the Gulf Coast seems to be getting more pronounced each day, said a Houston marketer, noting he is among the shippers running a "significant" negative imbalance on Transco (see Transportation Notes). That tightness is exacerbated by Northeast electric utilities continuing to switch from fuel oil to gas as crude futures remain near $18/bbl, he said. In addition, the marketer added, the MW outage of nuclear plants nationwide is 18% greater this spring than last. (FirstEnergy's Davis-Besse plant in Oak Harbor, OH, is the latest nuke outage, beginning a 25-day maintenance period today.)

Among the reasons people are noticing more supply shortages at Louisiana points lately is that Texas and Louisiana prices have reached approximate parity, one source noted. Some traders that had been bringing Texas gas across the Sabine River to sell at Louisiana points while Texas prices were lower, have now turned to making their purchases in Louisiana instead, he said.

CIG-DJ Basin was the rare market making no new gains Thursday, probably because its run-up of about 20 cents the previous day had easily topped a mostly flat market.

A Texas source regarded the AGA storage injection figure of 2 Bcf as "very bullish," but doesn't think those feelings will last long. He looks for a "big" injection report next week.

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