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Failing Weather Demand Pushes Most Points Lower

As expected, the loss of quite a bit of cooling demand from earlier in the week with almost-negligible replacement by new heating load didn't allow Wednesday's overall minor gains to persist. Instead, cash prices fell almost the board Thursday. The June futures drop of 6.5 cents a day earlier was another bearish factor in Thursday's market.

Except for flat numbers at the three Western Canada points, losses ranged from about a nickel to about 20 cents. A large majority of them were in double double digits and fairly evenly distributed geographically.

The Energy Information Administration met many consensus expectations when it reported a 70 Bcf storage build for the week ending May 6. But although the injection was far short of comparable figures of 92 Bcf a year earlier and an 89 Bcf five-year average, Nymex traders took a somewhat dim view of its bullishness by sending prompt-month futures only 1.3 cents higher (see related story).

Some signs of pipeline problems from the Mississippi River flooding began to show up. Tennessee declared a force majeure event between Main Line Valves 516 and 521 on its 500 Line, citing floodwaters in and around the Atchafalaya River basin in South Louisiana. Tennessee said it will isolate that section and require five meters in the area to be shut in by the the start of Friday's gas day and their nominations taken to zero by the Timely Cycle for Saturday's gas day.

An extension of PG&E's high-inventory OFO (see Transportation Notes) carried with it a looser imbalance tolerance, and IntercontinentalExchange (ICE) reported that although PG&E citygate pricing declined by a little more than a nickel, ICE trading activity there zoomed from 1,187,000 MMBtu Wednesday to 1,387,900 MMBtu Thursday.

In contrast to the PG&E citygate volume increase, ICE said Henry Hub deals on its platform fell from 908,500 MMBtu to 755,900 MMBtu while prices softened nearly 15 cents.

Although it ended an Overage Alert Day Thursday, Florida Gas Transmission said there was enough heat remaining in the near-term Florida forecast to create the possibility of issuing a new OAD.

Although some western sections of the South along with Florida would see highs remain in the 80s and occasionally 90s, most of the rest of the region would be limited to the 70s going into the weekend. And although there was a fair amount of cooling load in various parts of the Midwest and Northeast during the first two to three days of the week, they are entering a period of cool to chilly conditions in which many residents likely will be reluctant to fire up their furnaces again.

Even with snow still a possibility in the mountainous sections, the Rockies and Western Canada will generally be moderate to chilly along with most of the rest of the West -- the exception being forecasts of peak temperatures staying around 90 or higher in parts of the desert Southwest for a while longer.

A couple of Midwest sources confirmed the changing weather trends. A utility buyer in the Lower Midwest remarked on the recent big temperature swings lately, saying the company's service area had experienced a date-specific record high of 93 early in the week but would be getting fairly cold soon. Based on similar conditions last May, the utility expects some heating load to result from weekend highs in the mid 50s and lows in the 40s. Thus she plans to buy "a little" spot gas for the weekend just to be prepared. However, she doesn't expect any ramp-up in heating demand to last very long.

And a marketer in the Upper Midwest had much the same outlook, saying it was about as warm for mid-May Thursday in years, but she anticipates needing to participate in the daily market Friday to meet the heating needs of some clients. The marketer said it wouldn't be surprising to see prices keep softening for quite a while, noting that any small gains in heating demand in northern market areas will be mostly offset by cooler weather in the South.

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