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All Points Fall as Negative Price Influences Mount

While there had been a few exceptions to overall price movement up or down on each day earlier in the week, all points were on the same page Friday in recording losses ranging from a little less than 20 cents to half a dollar.

Four previous days of screen weakness, high linepack on some western pipes, returning Gulf of Mexico supplies from hurricane-prompted shut-ins and the typical slump in industrial demand over a weekend clearly outweighed continuing high power generation load from a nationwide heat wave.

The lack of a threat to offshore production from newly minted Tropical Storm Franklin likely played a small part in the spot market's bearishness, one source suggested. The storm was moving northward from the Bahamas and expected to curve northeastward out toward the central Atlantic Saturday, the National Hurricane Center said.

Although the Midwest, South and most of the West were expected to remain under the broiler through the weekend, the Northeast was due to get a small break from the heat, thanks to a cold front. People in the Midwest and Rockies will have to wait a little longer, but they can also expect some temperature relief by the middle of this week, The Weather Channel said.

In its final tally on Hurricane Emily-related shut-ins, Minerals Management Service (MMS) said only 107.14 MMcf/d remained offline Friday, based on reports it got from five companies by 11:30 a.m. CDT. Oil shut-ins totaled 7,886 bbl/d, MMS said, and no platforms or drilling rigs were still evacuated. Cumulative deferred gas production from Monday through Friday last week amounted to 1.583 Bcf, or 0.043% of the Gulf of Mexico's annual output of about 3.65 Tcf, the agency added.

The Southern California border saw one of the day's largest losses of about 40 cents even with the state expected to set an all-time record for electricity usage Friday afternoon and evening, a day after the California Independent System Operator (CAISO) issued a Stage 2 alert for the southern half of the state only and following two straight days in which Southern California Edison eclipsed its all-time power sendout record. The situation was exacerbated by the unplanned shutdown of several generating units that have been driven hard in recent weeks by California's heat, including the gas-fired 682 MW Unit 7 at Mirant's Pittsburg power station and the coal-fired 790 MW Unit 2 at the Mohave plant in Nevada operated by SoCal Edison.

A Midcontinent marketer said he thought prices would keep going down Monday due to hot weather relief approaching in some areas, but not by much. "$7 seems to be a floor price for futures," he remarked, adding that natural gas is still relatively cheap when compared to crude oil prices.

Looking ahead, the marketer said he expects the industry to see $12 futures this winter, "and cash gas will follow." He noted that just a few months ago traders were talking about how the screen was running as much as $2-3 above Henry Hub numbers at times, but lately it's the cash gas getting the premium most of the time. "I have no doubt" that futures will achieve a major premium again over the Hub cash this winter, which he expects to be an overdue severe season.

He was unaware of any business being done for August yet, saying there was plenty of time for that during this Monday-Friday bidweek.

A Northeast marketer said the region would cool off a bit to highs in the 80s during the weekend, which translated into power generation load subsiding slightly.

A Calgary-based producer said he was "firefighting" Friday afternoon and too busy to talk due to problems with nominations on Midwestern Gas Transmission to the Chicago area. Because of an unplanned unit outage at Compressor Station No. 2118, the pipeline was curtailing everything "but in path, in direction firm" service for Friday's gas day through the station.

Citigroup analyst Kyle Cooper said his initial estimation for the upcoming storage report calls for a build the mid 40s Bcf. He mentioned that "it is likely this will be the hottest week [July 18-22] on record since 1994."

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