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Hints of Bearish Price Turn Are Substantiated

The signs of a potential reversal in this week's cash price run-up that began to surface Wednesday (see Daily GPI, Sept. 1) proved to be highly accurate. The September aftermarket, which had gotten off to a strong start the day before, was headed downhill in a hurry Thursday with losses ranging from about 30 cents to $2.60 or so.

The largest declines of a dollar or more tended to concentrate in the Northeast and Gulf Coast, while numbers in the Midcontinent/Midwest and West all fell less than a dollar.

Offshore shut-ins caused by Hurricane Katrina, while still massive, continued to improve a bit. Minerals Management Service said its count of Gulf of Mexico outages stood at 7.9 Bcf/d Thursday, down from the 8.35 Bcf/d tallied Wednesday (see related story).

While heat levels across the southern half of the U.S. will remain fairly high Friday, moderate conditions in northern market areas are bearish for gas-fired power generation load.

After experiencing normal to low linepack for some time, Kern River reported experiencing high linepack levels again Thursday, as it had for much of the summer prior to the last couple of weeks or so.

The Energy Information Administration estimated a storage injection of 58 Bcf for the week ending Aug. 26, coming in near the lower end of prior expectations. The screen, which had been down in the early going, responded bullishly to the report and closed out the day up 28.5 cents. Nymex's crude oil, heating oil and unleaded gasoline contracts also moved higher.

The futures upturn complicated making a call on Friday's prices. Besides the limited cooling demand in the North, the spot market will be trading for the Labor Day holiday weekend, which is usually marked by softening.

A Calgary-based producer said he thinks prices will rally moderately at all points Friday because of the Nymex strength Thursday, although he expects gains to be smallest in the Midwest and West. But after a little more reflection, he said he might want to hedge his bets on predicting a rebound because of the extra industrial load declines associated with a long weekend. Canadian traders will be off Monday since Labor Day is one of the few holidays shared by his country and the U.S., he said.

A Midcontinent producer reported having no problems with bidweek, "but I can't figure out why the prices are so high." Weather-related demand in the Midwest market area seems to be tapering off going into the weekend, he said. The producer said he expects prices to go higher at first Friday but then go down, because the negative influences of a holiday weekend and moderate late-summer weather in the North should be enough to offset the screen's rise Thursday. At that point he had to hang up the phone, saying a problem with supplies not showing up had arisen.

A Houston-based marketer also said he was experiencing some no-show problems with both daily spot gas and September baseload. He admitted being surprised by futures activity, saying he had thought the screen would stay down Thursday and then go higher Friday "because nobody would want to go home short for a long weekend" with all of the offshore uncertainty remaining.

Tropical Depression 13 strengthened just enough to claim the season's 12th name as Tropical Storm Lee, but then reverted to depression status a few hours later. It remained well out in the Atlantic and posed no threat to land. Meanwhile, Tropical Depression 14 formed well east of the northern Leeward Islands. "It is expected to slowly strengthen to a tropical storm, but is forecast to turn northwestward and then northward, possibly passing east of Bermuda, and at this point not forecast to affect the U.S.," The Weather Channel said.

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