As gas traders continue to keep a close eye on the coming summer, the mixed-pricing dynamic that was prevalent last week carried over into Monday's cash market as the East and the Gulf Coast recorded losses while the Midcontinent turned in both pluses and minuses and the West scored mostly gains.

Minus a few points that managed to record gains, most Texas and Louisiana points dropped from a nickel at Southern Natural to a little more than a quarter at Carthage, while Northeast points recorded losses ranging from the high teens at Columbia gas to approximately 30 cents at CNG. Out West, the Rockies recorded a few losses (up to 20 cents at Stanfield), but far more gains, ranging from 11 cents at El Paso Bondad to a quarter at CIG. California points recorded both double-digit-cent losses and gains.

Adding fuel to the perception that air conditioning load could put a significant burden on natural gas this summer, WSI Corp. said Monday in its seasonal outlook that the South and East are expected to be especially warmer than normal this year (see related story). This comes the week after AccuWeather.com Chief Long-Range Forecaster Joe Bastardi and his team said they expect this summer to be hotter than normal across a large part of the United States, including the most heavily populated areas of the Northeast (see Daily GPI, May 18).

However, with that weather still weeks away, weakness dominated the Northeast Monday. "Everything was down," said a Northeast utility buyer, who added, "We didn't really buy a whole lot out there. Since we are getting the warmer weather, we are up against our injection limits, so we only need to buy a little bit. We did a little at Niagara, South Texas and Dawn, but nothing huge. Everything was mostly down about 20 to 30 cents in the Northeast." He added that there were no real flow restrictions to speak of.

Despite the calls for a hot summer in the East, the buyer said his company should be all set. "The winter got cold towards the end, but our storage levels came out OK. We are at our planned level for storage so far, so we are on path where we can levelize our injections," he added. "When we are able to, we often levelize our injections to protect ourselves from prices because in this market you never know what they are going to do. We don't have a lot of air conditioning load on our system, so getting the gas shouldn't be a problem. The real question is how much demand for electric generation will come from the Washington, DC, region and below. Obviously, that will drive the price higher if we get the hotter than normal summer that many expect."

Others were focusing on the Henry Hub's relationship with June futures. The Henry Hub was averaging $7.66 on Monday for Tuesday delivery, down 21 cents from Friday's average price. June natural gas futures finished out Monday at $7913, down 3.1 cents from Friday, but 25.3 cents higher than the Henry Hub.

"The only thing that really is of note is the Henry Hub is still well under June futures," said Steve Blair, a broker with Rafferty Technical Research in New York. "It really doesn't make a whole lot of sense. What you are looking at is balance-of-the-month gas and cash should be getting a little weaker as we go along this week ahead of the long weekend. With a three-day weekend, one day of industrial demand is taken out of the picture. Cash should ease off a bit as a result, but we will have to see what unfolds."

He noted that by the way cash is staying fairly stable and under the futures screen, there is no big buying in the cash market to converge it to futures. "The current period in the markets is much different than it was back in April when it was cold and the utilities were out buying gas to use rather than to put in storage," he said. "As a result the cash market converged with futures. The cash weakness should indicate weakness in futures, but it is not there. You have the speculative traders and the funds that are intent on protecting the long position.

"We are still in the shoulder month period where we don't have any more winter demand, but we also don't have summer air conditioning demand either. Even with the fundamentals we have with comfortable storage levels, we are looking at a market that wants to move higher for no good reason. We really aren't going to see anything fundamentally happen for a while. The first thing that could happen is the arrival of an early summer, but we are not seeing that occurring anywhere. There is also talk that the next three weeks of storage injections could average 100 Bcf a week. That would put us over 2.1 Tcf in storage going into the first week of June. Now that is a lot of gas."

Focusing more on the weather, Blair said that while the warmer-than-normal summer forecasts continue to roll in, most of them are calling for the real heat to hit later in the season. "None of the forecasts are calling for early heat," Blair said. "If the forecasts were for warmer-than-normal temperatures with an early start to the season, that could definitely get the market moving higher."

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