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New Screen Strength Generates Tiny Cash Rebound

New Screen Strength Generates Tiny Cash Rebound

The price plunge that had seemed to be gearing up Wednesday came to a quick halt Thursday as cash quotes were "up a 'smidge,' maybe a penny or two," according to a trader doing business in the Midcontinent and Southwest. Sources dragged out the old refrain of "following the screen," although the tiny upticks in cash lagged far behind the near-dime increase in the Henry Hub futures contract for June. Essentially the screen strength arrested a developing bearish trend for cash.

A marketer reported substantial gas buying by Texas electric utilities; after all, "it's hot down here," he said.

Many people tried to push prices down early, according to a Midcontinent trader, "but we heard some early flat offers and thus waited to make our sales until after some small increases had emerged."

Eastern points are trading for more than a dime below indexes, but virtually all of the West is still in the vicinity of index levels. Maintenance outages, both planned and unplanned, are playing a large part in the relative western firmness. Wednesday was the last day for San Juan Basin trading to be affected by downtime at the Milagro plant, which ended Thursday, an aggregator said. However, the basin will lose a net of more than 700 MMcf Monday when the Blanco plant takes its turn for maintenance (see Transportation Notes), he said. A marketer said he was already getting calls for Monday-only San Juan gas and is looking for price increases today in both the San Juan and Permian Basins.

Malin and PG&E citygate numbers are a few cents over index largely due to constraints on the PG&E Gas Transmission-Northwest system (see Transportation Notes), a marketer said. Because the constraints are upstream of Stanfield, they also are supporting prices at Sumas and Stanfield, he said.

One factor that may have helped prop up gas prices recently is the cost of penalties for electric utilities failing to toe the line on nitrogen oxide (NOx) emissions, according to a market analyst. Paul Messerschmidt of Energy Security Analysis Inc. pointed out to a GasMart/Power '99 audience earlier this week that May 1 was the start of the 1999 ozone season in the Northeast. For plants without the required NOx credits the penalty is $6,600 per ton, "which creates a NOx penalty for coal, whether it's eastern or western, north of $15/MWh," Messerschmidt said. "At that price you're going to think long and hard before running a coal plant. Some utilities that aren't sure how many NOx allowances they are going to need for this year may have decided to front-load some of their gas consumption early in the ozone season."

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