Differing weather fundamentals in various regions produced mixed price movement again Thursday, but due to a mini-heat wave developing in the Northeast, there were considerably more gains than on Wednesday when softness pervaded most of the market. However, sources agreed that declines will set in again at most if not all points in Friday's trading for the holiday weekend.

Price changes in either direction were not especially large in most cases, as a lot of points were flat or less than a dime up or down. Gains ran as high as about 15 cents, while losses topped off around 30 cents.

The market divided largely on geographic lines, with the Northeast heat Friday resulting in flat to higher numbers at citygates there and in the Gulf Coast. After a cool start of the week, Boston and New York are forecast to reach highs of 89-90 degrees Friday, which would exceed the expected Houston peak by 6-7 cents. On the other hand, a cooldown in the Midwest and generally moderate conditions in the Midcontinent and West had prices falling at most points in those regions. The Rockies, which has warmed in the last two days to quite mild weather, continued to see the biggest declines.

The impact of a month-long outage of the Westcoast Pine River Gas Plant, which started Sunday and is taking an estimated 330 MMcf/d off the market, may have been showing up belatedly. Westcoast Station 2, which dropped C18 cents Wednesday, was one of the only three western points (along with Sumas and Waha) to see a gain Thursday by rising about C12 cents.

The Energy Information Administration's estimate of a 104 Bcf increase in storage during the week ending May 18 exceeded consensus expectations in the high 90s Bcf. Although as usual in recent months the build had been thoroughly factored into market psychology beforehand, Nymex treated the report as moderately bearish by extending the June futures decline by another 7.6 cents.

In a "Flash Commentary," Citigroup analyst Tim Evans (who had made a prior estimate of an 85 Bcf injection) said, "The 104 Bcf in net injections to storage for last week was higher than expected and came despite having a higher level of overall degree day accumulations. This may reflect the difference in market sensitivity between heating degree days and cooling degree days or it could be a function of added LNG imports or other supplies. It's certainly a bearish figure that represents a test of whether this is a bull market or a bear market."

Excess supplies remained a factor in the cash market, especially in the West. PG&E kept a systemwide high-inventory OFO in place through at least Friday, leaving the positive imbalance tolerance unchanged at 5%. And Southern California Gas waited until Thursday afternoon to announce that it also was declaring a high-linepack OFO for Friday (see Transportation Notes). Kern River reported high linepack in its two farthest downstream segments. Linepack was normal in the other two segments, the pipeline said.

In the East, Southern Natural Gas said the likelihood of its issuing a Type 6 OFO for long imbalances had grown to "highly likely" for both Saturday and Sunday.

A Midcontinent producer confidently predicted that cash prices "will get smoked" for the long weekend. Referring to several pipelines having a glut of supply, he reported being told by another trader that he expects to turn back 50 MMcf/d of May baseload for the weekend to his supplier under a flexible contract. Midwest demand should be quite weak with regional highs falling into the low 70s behind a cold front (Chicago, which peaked around 84 Thursday, was predicted to chill out to the 70-degree area Friday).

The producer said a lot of people were trying to wrap up June deals prior to the weekend, but he expects a fair amount of bidweek business to remain on Tuesday's June futures expiration. He said he was seeing "pretty strong demand" for June baseload. He quoted a MichCon deal Thursday at basis of plus 19.25 cents and said he sold fixed-price gas for $7.67 at the Chicago citygate.

A Texas-based marketer agreed with the producer that Friday should see falling prices, particularly since the Northeast heat will last only one day and the region is due to cool off again for the weekend. He noted that the Midwest and Northeast are going in opposite temperature directions Friday -- the Midwest colder and the Northeast hotter.

However, the marketer disagreed about post-holiday bidweek activity. He perceived a great deal of June trading being done Thursday, and because he thinks most traders don't want to wait, he expects nearly all June deals to be finished during Friday's holiday weekend-compressed trading. He looks for "very little" getting done after the holiday.

The marketer said Chicago basis for June was tightening again after getting weaker earlier in the week. Chicago was bid at minus 9.5 cents Friday, and the ICE midpoint had fallen to minus 6 cents, he said. The firming basis likely was a function of the screen going lower again, he said.

A Midwestern marketer said her area was supposed to approach 90 degrees Thursday, which caused her to run her air conditioner, but would be down to the low 70s by the weekend after the cold front passed. Her company is buying less June baseload than in May because "we've been building up our customers' storage" prior to the start of hurricane season. One optimistic development was that her boss had heard from a producer that Hurricane Katrina had "weeded out" the weaker facilities in the Gulf of Mexico, so the industry was unlikely to see a repeat of that much damage to offshore infrastructure.

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