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Cash Stays Mostly Flat Amid Bearish Conditions

Cash Stays Mostly Flat Amid Bearish Conditions

Bears came out of the gate in force Thursday in reaction to a higher than expected 91 Bcf storage injection, a plummeting futures screen and cooling temperatures in the Northeast. But for all the sound and fury most points stayed flat to Wednesday's results or registered minuscule drops of a penny or so.

The onslaught of bearish fundamental news was the least of traders worries yesterday, however. Energy trading took a severe hit from a devastating computer virus that was delivered as an email attachment named "zipped_files.exe." When activated, the virus proceeds to destroy files with various extensions. The virus, called Worm.Explore.Zip, which originated in Israel, was reported by several companies and seriously inhibited El Paso's Houston-based marketing operation. "We got infected around 1 p.m. and had to shut everything down. Basically, we were out of commission at that point," an El Paso spokeswoman said. "[Friday], we have special instructions on how to reboot and hopefully, not too much was lost."

Those who were trading attributed the cash market's support in the face of a bearish storage report, moderating demand and plummeting futures to utilities playing catch-up on storage injections after relying on stored gas during the heat wave earlier this week.

Alberta was able to fend off the bears Thursday because of an extension of a NOVA system outage (see Transportation Notes). Intra-Alberta was trading in the mid- to high-C$2.80s as it has been all week. Maintenance has taken longer than expected and is keeping more than 1 Bcf of gas off the system.

In Florida, a trader who did deals on Sonat in the mid to high $2.30s said the situation was going to get worse before it gets better. "Everything is in limbo right now. Demand is soft due to mild weather, and oil is cheaper to use than gas right now. I think Sonat is going to get down to the low $2.30s, and then action will pick up because that is when gas will become cheaper than oil."

Although the Northeast markets finished lower Thursday, the fall was nowhere near as large as Wednesday's price drop. The New York Citygate lost a couple of cents, but still stayed in the mid $2.50s. "People are realizing the need is just not there anymore," a Northeast source said, but he admitted that he did not know how much farther the Northeast prices would fall. Temperatures in New York were in the low to mid 70s yesterday, and forecasts call for only a mild warm-up into the low 80s over the weekend.

One source, quoting Sumas prices in the low $2.00s, called western points the "Energizer Bunnies" of the cash market. He defied a widespread industry belief that snowmelt and subsequent abundance of hydropower will drive down prices in the West. "I don't think anything can bring these prices down. Look at [Thursday]. The screen slid down fast, but Sumas is trading flat. There is enough demand to go around, and I don't see anything lowering prices."

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