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Post-Holiday Prices Up, But Softening Expected Today

Post-Holiday Prices Up, But Softening Expected Today

The cash market emerged from the July 4 holiday weekend with a strong performance in which prices ranged from flat at some points in the Gulf Coast and Midcontinent to nearly 20 cents higher in California. The West made a remarkable recovery from last Friday's steep dives, reclaiming nearly all of the ground it had lost. A heat wave over the eastern third of the U.S.-especially acute in the Northeast-kept prices firm in the producing and market areas.

The market strength wasn't expected to last, however. The Henry Hub futures contract for August waited until after the bulk of cash trading was finished before making most of its near-dime plunge Tuesday, but it was carrying late cash quotes down with it in almost every market, sources said. In addition to the negative screen influence, a cooling trend due Tuesday night in the Northeast will erase a significant amount of power peaking load today, they said. A fall in high temperatures from 100 degrees to 90 degrees may not seem like all that much, said an official of a Northeast power grid operator, but it likely will eliminate most of the strain that many area power utilities labored under Tuesday.

The PJM [Pennsylvania-New Jersey-Maryland] Interconnection implemented a 5% voltage reduction across its system that was still in effect as of late Tuesday afternoon. PJM earlier had warned of the possibility of rolling blackouts, but none were necessary, according to a spokeswoman. Tuesday's unofficial PJM peak load was around 52,000 megawatts, she said, breaking the previous record of 49,406 megawatts set July 15, 1997.

As it did last week, ISO (Independent System Operator) New England had a Power Warning in effect Tuesday in an effort to reduce consumer electrical demand. In addition, numerous electric utilities throughout the Northeast issued customer appeals for power conservation measures. Electric prices spiked in response to the situation. PJM numbers for today's transmission were in the $115-150/MWh range, a marketer said, compared to $30-35 averages in recent weeks. He and another source confirmed that $850/MWh was the going price for intraday PJM juice Tuesday. Northeast citygate prices for gas were up about a nickel into the low $2.60s, which seemed puny in comparison to the power market. There was also a premium for intraday gas, but it was small. One trader reported an intraday Transco Zone 6-NYC deal at $2.68, only 3 cents over his average for next-day flow.

A marketer who was able to sell Northern Natural field gas at Waha for $2.26 early, said the later drop into the $2.10s was so precipitous "that we 'hid' 3.5 MMcf/d rather than sell it."

Double-digit increases were the order of the day at many Western points. The Southern California border and PG&E citygate rebounded from Friday's debacle into the low to mid $2.40s and high $2.50s respectively. SoCal Gas no longer had an Overnominations Day in effect, one trader said, and although PG&E had a high-inventory OFO in effect Tuesday (see Transportation Notes), it was not extended into today. Quotes for San Juan Basin and Rockies pipes, spurred by the renewed power generation demand in California and east-of-California markets, climbed back into the neighborhood of July index levels.

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