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West Plunges; Heat Supports Prices in East

West Plunges; Heat Supports Prices in East

As many had expected, prospects of severe heat averted much of the softness that normally accompanies a Fourth of July weekend, considered the year's lowest demand period. But that was true only in eastern markets Friday. The bottom was dropping out for prices in the West, particularly at the Southern California border.

Cooler weather in California combined with high-inventory OFOs-both real and potential-to bring down prices throughout the West. Only flatness in intra-Alberta, where storage injections tended to soak up much of the available supply, survived the plunge following a Canada Day holiday hiatus. The Permian Basin and Waha resisted the softness more than other points because of air conditioning load in Texas and the Midcontinent/Midwest.

Southern California Gas continued an Overnominations Day(OD) declaration, initiated Thursday, through at least Saturday, and that knocked the stuffing out of border quotes. The border, with a $2.44 average Thursday that was over a nickel above index, was down to the $2.30s immediately Friday and quickly kept eroding until last-minute deals were being reported as low as $2.00.

Some people thought that Thursday's OD might have taken enough gas off the SoCal system so it wouldn't last, said an Oklahoma-based trader, "but that didn't happen." The OD notice was properly posted on the utility's GasSelect bulletin board by 9:30 a.m. PDT Thursday, he said, but then acknowledged that few people were likely to be looking for an OFO-like issuance then because they are quite rare on weekdays. (Another source said his company was unable to gain access to the bulletin board until some time well after 9:30.)

Pacific Gas & Electric continued to expect a high-inventory situtation would remain for its system through Monday but had refrained from issuing an OFO as of Friday afternoon. Widespread trader expectations of an OFO caused PG&E citygates to drop a little over 20 cents.

The considerable weakness of the California market spilled over into the Rockies and Southwest, where several points recorded declines in the double digits, led by a San Juan Basin fall of nearly 20 cents.

Meanwhile, it was obvious that Northeast buyers were taking hot weather forecasts to heart and stocking up on gas for the holiday weekend just in case, a marketer said. She thought Transco Zone 6-NYC deliveries were up about a nickel "because there weren't a lot of sellers involved today [Friday]" due to holiday concerns. Another source saw the region's utilities as active buyers "preparing for the worst." Sunday looks to be the peak day of the holiday period, he said. "They [utilities] will likely be burning everything Sunday and turning back the excess on Saturday, Monday and Tuesday," he predicted.

The Northeast demand stabilized Gulf Coast prices at flat to a few cents lower. Trading activity certainly got sparse in a hurry, though, said a marketer as he and others had fewer deals to report than usual. Sonat numbers got pushed down by the potential of a weekend OFO, but none ever materialized, he said.

A tropical disturbance was detected Friday in Mexico's Bay of Campeche while a tropical wave was reported in the northern Caribbean Sea.

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