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West's Friday Hex Holds; East Up on Heat Prospects

West's Friday Hex Holds; East Up on Heat Prospects

In the matchup of East vs. West markets, it was the East by a knockout Friday. While western prices plunged for the third straight weekend, the East relied on existing and predicted hot weather to range from flat to up about a nickel at most points and realize gains of almost a dime at Northeast citygates. A screen rise of less than a penny was considered a negligible factor in both regions.

The screen's late rise Thursday laid a firm foundation for cash trading Friday, and then the weather predictions drove things higher from there, a Northeast-oriented marketer said. A power trader confirmed strong spikes in regional electric prices due to heat "both in the forecasts and outside traders' windows." The New England pool jumped to $580/MWh in the hourly peaking market Friday, he said, and PJM (Pennsylvania-New Jersey-Maryland plus Delaware) was trading around $120/MWh for today's transmission.

Chicago citygates don't seem to be as liquid as they used to be, a Midcontinent source said. "You know a point has become less liquid when your range on the day [$2.20-21] is only 1 cent, but it's still exciting."

To the surprise of absolutely no participant in western markets, both Southern California Gas and Pacific Gas & Electric had high-inventory OFOs in effect for at least Saturday. A number of sources expect the pattern of weekend OFOs by the big California LDCs, begun three Fridays ago, to continue for the foreseeable future.

The OFOs are greatly dependent on what kind of power load there is, and it was fairly weak for the weekend, according to the head of western trading for a major aggregator. The utilities are running their systems more tightly than they have in the past and thus are more ready to pull the OFO trigger, he said. However, he doesn't think the orders will be as severe or frequent in another month or so. Their recent predictability doesn't create a trading advantage or disadvantage for anybody strategy-wise, the trading chief said, because "everybody" knows what's coming.

Western price weakness was topped off by PG&E citygate and Southern California border declines of over 20 cents. Rockies drops in the vicinity of a dime were milder. To one marketer, it seemed "like a lot of Rockies gas switched from going west to seeking out Midcontinent/Midwest destinations."

Two weather services reported a tropical wave over Mexico's Yucatan Peninsula that was weak late last week but could strengthen if it moves over water.

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