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Most Points Rally; Northeast Leads Losses

August 8, 2005
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NGI sources generally were correct Thursday in predicting a moderate cash rally for Friday, but not entirely accurate. Prices fell at virtually all Northeast citygates Friday as a cold front took regional temperatures lower for the weekend, and at scattered points elsewhere. Otherwise quotes ranged from flat to as much as 20 cents higher.

The argument for higher weekend numbers was based on Thursday's 12-cent screen rebound, a bullish storage report that day and the fact that only a moderate amount of power generation load was being lost in northern market areas while it would remain strong in other regions. That was largely the case, but apparently the Northeast was cooling off more for the weekend than expected.

The Midwest had already been cooled off by a cold front and was due to see moderately higher temperatures by the end of the weekend as warmer air followed the front. That helped support Midwest/Midcontinent points. Southern heat was moderating a bit due to cloud cover and/or cooling rains, and Gulf Coast points responded with mostly small gains or a few small drops.

Western prices tended to show the greatest strength Friday as hot weather continued to dominate most of the region, and former high-linepack issues on Kern River and Westcoast had been eliminated.

Despite the Northeast being Friday's softest market, the Long Island Power Authority announced that it had set another peak summer-demand record by delivering 5,267 megawatts during the hour ending at 3 p.m. The previous record of 5,239 megawatts had been set July 19 on the second full day of a three-day heat wave, LIPA said.

Tropical Depression Nine showed up Friday in the central Atlantic and was expected to become Tropical Storm Irene over the next few days, but its projected path had it aimed at the central East Coast rather than the Gulf of Mexico.

Prospects for higher prices on Monday are considered good because of a 22.9-cent gain in natural gas futures Friday, which was accompanied by strength in Nymex's petroleum-based offerings. Crude oil for September delivery hit a prompt-month daily settlement record by shooting up 93 cents to $62.31/bbl as worries persisted about U.S. refinery disruptions, falling gasoline inventories and global supply problems. In addition, the National Weather Service predicted above normal temperatures in the Northeast, Mid-Atlantic and Midwest this week (see Daily GPI, Aug. 4).

The buyer for a Lower Midwest LDC said it had cooled off a lot in her area, so her company was mostly injecting baseload gas into storage. It had a good throughput month in July thanks to local electric generators using a lot of gas, "but we're laying low for right now," she said. Temperatures should be getting warmer again around Tuesday, the buyer said. She assumed that Thursday's storage report was a big reason for most prices rising Friday despite less weather-related demand.

A Calgary-based producer said area temperatures were reaching nearly 90 degrees F. Friday, "but that's fairly unusual heat for us." He said he has to make a daily decision whether to put the company's British Columbia production into Alliance bound for Chicago or sell it at Westcoast Station 2.

Citigroup analyst Kyle Cooper said his initial estimation for the next storage report calls for a build of nearly 40 Bcf.

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