The drop in demand over an extra-long holiday weekend and aforecasted trend of more moderate temperatures in some market areastowards the end of the weekend were enough to drag cash priceslower Wednesday. But due to a big last-minute screen jump and avery large storage withdrawal number, sources predicted asubstantial rebound this week.

Variations in the amount of decline were wide-ranging. GulfCoast, Midcontinent/Midwest and Appalachian points generally rangedfrom barely lower to down about 15 cents, while drops at Northeastcitygates and most western points went from around 20 cents toclose to a dollar (Kingsgate and Transco Zone 6-NYC). Only Malin’sfall of a couple of cents or so avoided the greater overall westernsoftness. A Houston-based trader said Gulf Coast prices, whilelower, failed to soften nearly as much as he had anticipated.

After an early dip futures stayed about 5-6 cents higher most ofthe morning and waited until after cash trading was completed tomake a late leap to $6.59, up 18.2 cents on the day. It shows thatunder these high-priced and volatile market conditions, tradersdon’t want to risk going home in short positions over a longweekend, a marketer commented. Another source said EnronOnline wasin the low $6.60s for over-the-counter Nymex trading shortly afterthe screen made an early holiday exit at 1 p.m. EST.

The futures behavior by itself, coming too late to affect swingprices Wednesday, would have been a bullish sign for this week’smarket, a Midcontinent marketer said. But then it was amplifiedabout an hour later when AGA said 94 Bcf was withdrawn from storagein the previous week. “Our guess actually had been for 99 Bcf,” thetrader said, “but that was still a huge pull at 94, and it wasspread through all three reporting regions. Unless we get backMonday [today] and the whole country is basking in balmytemperatures (which I don’t expect to happen), we almost certainlyshould see a big increase in cash prices.”

The marketer’s outlook gets some support from the NationalWeather Service. Starting today below normal temperatures areexpected to prevail through almost the entire eastern half of theU.S, except for the Northeast. The West is seeing normaltemperatures, except for above normal temps in Southern California,NWS said.

Except for PG&E citygates falling more than 40 cents,numbers at the other two California points were only moderatelysofter compared to the rest of the West. This occurred despite theCalifornia Independent System Operator not needing to issue anymore power alerts Tuesday and Wednesday after having progressed toa Stage Two Electrical Emergency late Monday afternoon. Inaddition, the Palo Verde nuclear plant was back to nearly 100%operation Wednesday and Diablo Canyon 1 was at 20% as it continuedto ramp up operations. One western trader said he figured therelative firmness at the California border points was at leastpartially due to still substantial heating and power generationdemand, but more importantly to an effort to replenish SoCal Gasstorage. SoCal storage facilities are less than half full with thewinter season barely begun.

The dire status of SoCal storage is reflected in tremendouslystrong Southern California border basis for December. Tradersmarveled during the September bidweek when border basis averagednearly plus 250, but they thought that probably was an aberrationresulting from the state’s frequent power emergencies throughoutthe summer. “Well, you ain’t seen nothin’ yet,” said a westerntrader reporting doing December border deals Wednesday at basis ofplus 490. Based on Wednesday’s screen, that would represent fixedprices around $11.50. He also quoted El Paso-Permian at plus 9-10and Waha at plus 5-6, representing reversals from negative basislevels for November.

As expected, bidweek activity was almost nil prior to theholiday. A marketer said Gulf Coast pipes in general were being bidat index minus 1.25 compared to offers at index minus 1. OnlyTransco Station was being offered at a slight premium to index. AMidwest trader reported hearing basis of plus 7-8 for MichCon andplus 9.5-11 for Consumers Power. The slight extra strength forConsumers likely is because storage availability is better forMichCon, even though the two utilities aren’t far apart in theirtotal storage volumes, he said.

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