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Cash Market Goes Into Anticipated Swoon

Cash Market Goes Into Anticipated Swoon

Prices failed to fake out anyone Wednesday. With Tuesday's late softness on the Nymex screen carrying over into Wednesday and the subsidence of "the big bakeoff" in the Northeast, as one producer called it, it didn't take a crystal ball to make a bear market call. The larger declines on either side of a dime tended to cluster in the Gulf Coast, Appalachian, Northeast, Midcontinent and Midwest markets, while western drops generally were around a nickel or less. Unlike the late screen-related fallbacks reported Tuesday, traders said a number of points saw slight upticks in late deals Wednesday.

Everything has pretty well calmed down in the Northeast following a Tuesday in which many of the region's electric utilities set records for daily power sendout, a marketer said. She was unaware of any that were still under voltage restrictions or appealing to customers for energy conservation Wednesday. The easing of the heat strain was reflected in new PJM [Pennsylvania-New Jersey-Maryland plus Delaware] Interconnection prices for next-day transmission being reported in the $40s/MWh compared to well over $100 the day before.

A Midcontinent marketer was glad to see gas prices falling, saying his company had gone into July in a moderately short supply position. A Midcontinent producer wasn't so glad about the downturn, but he said the market started the day with most pipes in the area being bid as low as $2.08 while offers were at $2.13. Many transactions, particularly on Panhandle Eastern, were closed at $2.10-12 between 9 and 9:30 a.m. CDT, he said. After prices began to climb in the late going, he was able to sell gas at Northern Natural's demarcation point for $2.18.

Most sources were in consensus that there's little reason to look for any price turnaround before next week, if then. They pointed to forecasts for moderating weather and, while disagreeing on whether the AGA storage injection figure of 69 Bcf was a little lower or a little higher than expectations, essentially ruled it out as a significant market factor.

A Midcontinent trader, noting that his Chicago citygate quote of $2.20 was already 13 cents below the first-of-month index, found more reasons for a bearish outlook. It's the storage injection season, he said, yet it seems like hardly anyone is injecting gas. He also cited history: "If you look at Midcontinent prices last year, they entered July in the $2.30s and exited in the $1.90s. That could very well happen again. This is the time of year when things really fall off." The trader said he does business with power generation plants and is getting more sell calls from them than buy calls. One plant is operating at only 20% of its gas burn capacity, he said.

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