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Prices Move Back Closer to Flat, With Some Softness

The cash market bowed to a general lack of significant heating or cooling load and only minor flooding disruptions of production in South Louisiana in retreating to mostly near-flat numbers and several small losses Tuesday, although moderate upticks were recorded at a majority of points.

Most locations were flat to a little more than 15 cents higher, with only a few reaching double-digit gains. The top uptick at Dracut likely was related to some supply tightness resulting from an ongoing maintenance outage of the Canaport LNG receiving terminal in New Brunswick, which is expected to continue until the end of the month.

Scattered losses were all in single digits in ranging from a couple of pennies to a little less than a dime.

After three straight trading days of prior-day futures support, the cash market will have negative guidance for Wednesday after the prompt-month June contract reversed course into a slide of 13.6 cents Tuesday (see related story).

The flooding situation in South Louisiana's Atchafalaya River Basin is also having less impact on oil and gas production than expected. A statistical update on shut-ins from the Louisiana Department of Natural Resources was unavailable by deadline Tuesday, but a spokeswoman said the figures appeared to be only barely higher than those reported on Monday (see Daily GPI, May 17).

Another four gates were opened at the Morganza Spillway, making a total of 15, and the Army Corps of Engineers reportedly planned to open about 25% of the spillway's 125 gates.

Citi Futures Perspective analyst Tim Evans said an extra 776 MW of nuclear power had returned to the grid since Monday, which would tend to further erode the natural gas share of power generation fuels.

Spring weather moderation is returning to virtually the entire North American market, with only a few small areas expected to see temperatures get below the mid 40s Wednesday, with the 50s and 60s much more common. And except for some 80s highs in parts of Texas and Florida, substantive air conditioning load is fairly rare in the South for now. Even the Phoenix area of the desert Southwest, which occasionally surpassed 100 degrees earlier this spring, is due to peak only around 80 Wednesday.

A marketer said she was among those puzzled about why prices had been so strong Monday, and although the market was noticeably weaker Tuesday, it was still firmer than she would have expected. She thinks "everybody is waiting for the next shoe to drop" in the way of increasing storage injections and whether the gas-directed rig count will fall much further; if not, then price softness should get progressively weaker. She reported also hearing forecasts of a cooler-than-normal summer, which was likely to prevent any major rallies from lasting very long.

Henry Hub appeared to remain essentially impervious to the Atchafalaya Basin flooding well to the east of it. Prices there went up nearly a nickel, IntercontinentalExchange (ICE) said, while its ICE-traded volumes rose from 693,900 MMBtu Monday to 850,200 MMBtu Tuesday.

Monday's all-points price increases of 6 cents or more were accompanied by gains in nominated volumes at 14 of the 23 trading locations covered by Bentek Energy's U.S. Natural Gas Hub Flows chart. Bentek found the largest gains occurring at Waha, up 286,000 MMBtu (65%); Texas Eastern M-3, up 244,000 MMBtu (13%); Chicago citygate, up 166,000 MMBtu (6%); ANR-Louisiana, up 161,000 MMBtu (26%); and Northern Natural-demarc, up 117,000 MMBtu (23%). The top declines were reported for Northern Natural-Ventura, down 303,000 MMBtu (32%); Florida citygate, down 275,000 MMBtu (8%); and MichCon citygate, down 146,000 MMBtu (10%).

Stephen Smith of Stephen Smith Energy Associates said his final projection of an 89 Bcf storage injection for the week ending May 13 is up slightly from an earlier estimate of 87 Bcf. Credit Suisse analysts Hugh Li and Stefan Revielle said they look for a report of an 87 Bcf build.

Kyle Cooper of IAF Advisors anticipates a similar injection of 88 Bcf.

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