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Electric Load Pushes Cash Market Significantly Higher

Electric Load Pushes Cash Market Significantly Higher

Increases of more than a dime were the norm Monday as 80-90 degree temperatures throughout the eastern half of the country and the ensuing electric generation load caused gas prices at all points to rise substantially. New York Citygate led the way with prices increasing from the low $2.50s on Friday to the mid $2.70s yesterday. The need for Northeast electric generation was so critical yesterday that the New England ISO issued a "power warning" and asked consumers to voluntarily curb power use.

"Utility generation load really picked up today in the Northeast," one trader said. "People were burning whatever they had-coal, oil, natural gas. With power prices spiking to as much as $1,000/MWh (Nepool) it made sense to buy all the $2.70 gas you could burn. Coal and oil are cheaper, but then you have to pay for the sulfur credits." He did New York Citygate deals in the low to mid $2.70s and Tetco M3 incremental trades in the high $2.60s.

One source said hot weather caused Chicago prices to open 17 cents higher than Friday's close. Power pricing in the Midwest soared to $250-$300/MWh from $25-30/MWh late last week. "It's all about air conditioning," he said. "In the upper Midwest and Chicago, they're getting both the heat and the humidity. This weather is supposed to hang around all week so I think prices will do that too. The only thing that might change this strength is an outrageous AGA [storage injection] report on Wednesday." He quoted a Chicago Citygate high of $2.48 in early trading, but by mid-morning the point had ticked down to $2.43.

A Gulf Coast trader who did incremental deals at Transco Station 45 and ANR Southeast Louisiana in the mid 2.30s, said gas futures strength was also a factor in Monday's cash rise. "Although the futures market was relatively flat Monday, it is overall in a pretty strong position. After cash tumbled Friday, it had some catching up to do."

Even the West Coast, which often bucks the rest of the nation's trends, hopped into the rebound party. One trader who was active in the western region Monday said the uptick was not surprising. "Between the screen being so high and the West taking such a hard hit at the end of last week, western markets had nowhere to go but up." He quoted San Juan Basin trades in the high $2.00s, up from the mid $1.90s late last week.

Rebounding prices yesterday did not translate directly into success for one Southeast gas trader. He did incremental deals on Sonat in the high 2.30s and said activity in the area was minimal. "Nine out of 10 people I've talked to today have been sellers. Something is out of whack. Everybody with the ability to switch to oil in Florida is doing just that. Prices are up though, so tomorrow could be different."

The Chicago trader isn't the only one scratching his head about last week's storage report. One source expects a 85-95 Bcf storage injection in part because of the holiday weekend. Another said it was too early to guess what the AGA would say this Wednesday, but the report is not as important as the market's reaction to it. "Who knows what is going to happen this week," he said. "Last week's result of a 71 Bcf injection was on the low side for sure, but there is still an enormous overhang. For the Nymex to climb into the high 2.30s and low 2.40s and stay there is baffling."

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