Enough gas got traded early Thursday at prices within a penny ortwo of flat that late weakness reported at many points failed todrag down averages from Wednesday. However, the late downturns weretaken as a harbinger of continued softening today, especially withthe market subject to the normal drop in weekend demand. Themarket felt kind of juiced up Wednesday but was losing its steamThursday, according to a Southwest trader. He saw “some realsoftness” at the end in Permian Basin.

Sources again agreed that the screen was the major influence onthe cash market. The early Nymex run-up to as high as $2.45 didn’thave much impact, one said, but cash prices did tag along with thescreen later when it headed south. But a western trader said he iscurrently seeing more reluctance on the bid side than the offerside, and he thinks that means fundamentals are starting to”inexorably assert their proper place in the market.”

The reason cash is trading at such a discount to the Julyfutures screen (at one point Thursday Henry Hub was 7 cents underthe July print) is because a number of Northeast utilities aretaking advantage of higher (above-index) swing prices by sellingtheir baseload supplies, according to a Gulf Coast marketer. Sincethere isn’t enough demand to soak up the extra gas being offered,supplies are getting backed up into the field, where they’re notneeded either, he said. Relatively mild weather and high nuclearpower generation capacity is responsible for that, he concluded.

Chicago citygates were a notable exception to the late fallingtrend. A marketer reported Chicago quotes in the low $2.30s earlybut getting up to $2.37 at the end of the day, with most deals doneat $2.35-36. Another trader said a couple of Gulf Coast pipesreflected the general trend for a while by starting near theirhighs and then going lower, but then got squeezed higher again lateby tightening supplies. A Southeast trader said action is gettinghard to come by on Florida Gas Transmission. He had no quotes toreport for Zones 1 and 2 and only one in the high $2.30s-doneearly-for Zone 3. “It’s just been real sleepy down there [inFlorida market area]. You know when FP&L [Florida Power &Light] is selling any kind of gas imaginable into the market, thereare few buyers to be found.” He predicted a change next week,though, as temperatures in the high 80s and low 90s are expected toraise area market demand.

One source pointed out that with another couple of AGA storagereports like Wednesday’s, the year-on-year surplus that had seemedso gigantic at the start of injection season “will be out of here.”That’s when the gas deliverability problem that was the subject ofmuch discussion in recent months will start hitting home with moretraders, he said. However, a producer wasn’t so sure, saying thereare still non-believers in the deliverability “problem.”

Though insignificant to Gulf of Mexico production, the first two”events” of the fledgling 1999 Atlantic hurricane season haveoccurred. The National Hurricane Center Thursday reported twotropical waves-one several hundred miles south-southwest of theCape Verde Islands near Africa’s west coast and the other severalhundred miles east of the northern coast of South America. However,neither system was expected to develop.

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