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Cash Downturn Was Not Hard to See in Advance

Cash Downturn Was Not Hard to See in Advance

As presaged Tuesday by late retrenchment in cash quotes and a screen drop that carried over into Access trading, the cash market was in full retreat Wednesday. All points were off by at least a nickel or so, and most of the decreases were around a dime. In what was described often as quiet trading, the softening Henry Hub futures contract for June was the only significant influence on cash that sources could cite.

"It's the same old pattern as before: wherever the screen goes, we go," said a Houston-based marketer. He was in a bearish mood, saying it looks like fundamentals will continue to sit out the cash market for a while, "and meanwhile there's still this huge year-on-year storage surplus." The marketer expressed mild shock that Gulf Coast and Northeast prices didn't fall off any more than they did Wednesday.

Most of Tuesday's decay in futures value took place after cash had finished trading, so cash was mostly "catching up" Wednesday, according to one source. But don't underestimate this week's softness in crude and unleaded gasoline prices, he added; in fact, the "whole hydrocarbons complex is soft" and that is weighing down the gas market.

One source quoted Florida Gas Transmission-Zone 2 flat to Sonat on either side of $2.20. The two points have been trading within a half-cent of each other for over a month now, he said. FGT-Zone 2 prices are usually lower than Sonat's but have been coming on strong due to strong air conditioning load, he added.

A West Coast trader was surprised at the ability of Sumas (off about 4 cents) to withstand the downturn more than other markets. "I guess it is still a little cooler [in the Pacific Northwest] than people expect it to be, and those same people need gas for storage."

One trader was already selling intra-Alberta gas for June in the low to mid C$2.60s, approximately the same prices he was seeing for daily swing Wednesday.

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