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Prices End Week Mixed and Mostly Near Flat

Price movement was approximately evenly mixed between small gains and small losses of up to nearly a dime either way. Flat quotes were common, and none of the changes up or down reached double digits. The increases tended to be concentrated in the Midcontinent and Rockies.

Cash numbers got minor backing from the previous day's 1.3-cent rise in June futures, while the weekend decline of industrial demand was a slightly bearish influence.

The screen will provide a bit more positive guidance for traders of physical gas Monday after the prompt-month futures contract climbed another 5.2 cents Friday (see related story).

The prospect of about a quarter Bcf/d potentially getting taken off the market in South Louisiana apparently had no supportive impact on Gulf Coast prices, which were flat to a few pennies lower in nearly all cases.

The Louisiana Department of Natural Resources (DNR) estimated that Mississippi River flooding could cause the shut-in of 252.6 MMcf/d of gas production in the state's south-central Atchafalaya River basin, spokeswoman Anna Dearmon said Friday. A memo on the DNR website from Commissioner of Conservation James H. Welsh said the Army Corps of Engineers could decide on possibly opening the Morganza Spillway during the weekend in an attempt to protect the cities of Baton Rouge and New Orleans along with the massive refinery/petrochemical plant complex on the Mississippi River Corridor between them.

"This is to advise all operators of wells within the Atchafalaya Basin to immediately take any and all appropriate measures and precautions to secure well sites and production facilities within the basin and preventative measures to avoid any releases or spills," Welsh said.

One source commented that although there is no statistical certainty about it, he didn't expect the flooding to have a large impact on South Louisiana processing plants, "at least not to the extent it would have several years ago." Hurricanes Katrina and Rita knocked out a lot of processing capacity there in 2005, which sent prices spiraling, but the U.S. was much more dependent on Gulf of Mexico production than it is now, he said. Thus, the nation is far less dependent on Gulf Coast gas processors today than it was six years ago, he added.

The Weather Channel saw a varying weekend forecast for the Midwest, with warmer-than-average temperatures due from the upper Ohio Valley to the central Great Lakes, but cooler-than-average readings were expected in the Plains, upper Mississippi Valley and western Great Lakes. Air conditioning load was quickly dropping in much of the South, with some of the northerly sections not expected to get above 70 Saturday. And while conditions were turning cooler in the Northeast, they were unlikely to induce many residents to turn their furnaces back on. Meanwhile, it was cold in the Rockies, hot in parts of the desert Southwest and generally cool to chilly in the rest of the West.

A high-linepack OFO by SoCalGas (see Transportation Notes) had a negligible effect on flat Southern California border pricing, but IntercontinentalExchange (ICE) said border trading on its platform dropped from 650,800 MMBtu Thursday to 569,500 MMBtu Friday. In a likely related note, El Paso said Friday it might have to declare a Strained Operating Condition due to linepack climbing above 7,800 MMcf because of actual takes from its system falling short of scheduled quantities. Despite the excess linepack, weekend prices into El Paso at several locations were generally flat to a penny lower.

Meanwhile, PG&E citygate numbers were nearly a nickel higher with the utility ending a high-inventory OFO Saturday; however, citygate volumes on ICE plummeted from 1,387,900 MMBtu to 895,800 MMBtu.

The number of drilling rigs involved in natural gas activity in the U.S. took a dive of 16 to 874 in the week ending May 13, according to the Baker Hughes Rotary Rig Count. The count went down by two in the Gulf of Mexico while another 14 rigs were deactivated onshore, Baker Hughes said. Its most recent tally was 1% less than a month ago and 8% below the year-earlier level.

But a Rockies producer, although he considered the big rig count decline a step in the right direction in helping to rein in overproduction, was still unimpressed. He cited analyst reports saying the count must get below 800 and stay there for quite a while in order to make the decline really meaningful. Another factor in his region, he said, is that it is becoming both much faster and much cheaper to drill wells in the Rockies.

Noting Friday's small gains in the Rockies, he said the region was experiencing "pretty nippy weather" for pretty much all of last week, with up to 2 feet of snow falling in some of the mountain areas. Nevertheless, the western market for gas is going "to get really ugly" soon, he said, as substantial amounts of hydropower will be ramping up in the next few weeks and displace gas-fired electric generation.

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