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Prices Still Rising, But by Much Smaller Amounts

Quotes moved higher at nearly all points Tuesday, but the increases were considerably smaller than those that began the trading week. The cash market got a boost from hot weather that has set up camp in the South recently and from a further advance by prompt-month futures the day before.

However, temperature increases appear to have halted for the time being in Wednesday's forecast for much of the South and even to be retreating a bit in such locations as New Orleans and Oklahoma City. The Northeast also will see cooler conditions returning after a brief foray into unusually warm levels.

Trends are mixed in the Midwest (for example, the Chicago high is due to rise about 12 degrees Wednesday while Des Moines, IA, can expect a drop of the same amount, with both cities expected to peak around 63 as a result). Regardless, late May is currently cool in the Midwest but not cold enough for appreciable heating load. And again with parts of the desert Southwest as hot exceptions, most of the West is predicted to be cool to chilly, but not especially cold.

A drop of about a nickel by Tennessee Zone 5 and several scattered instances of flat quotes failed to make the cut of gains ranging from 2-3 cents to about C15 cents (Westcoast Station 2). A large majority of upticks were in single digits.

June futures ended a two-day string of lending support to next-day cash prices by finishing Tuesday close to unchanged, falling by a mere 0.1 cents (see related story).

With still a week to go before the official June 1 start of the 2011 Atlantic hurricane season, the National Hurricane Center noted the existence Tuesday of a surface low about 650 miles east-southeast of Bermuda but afforded it a near-zero chance of development due to unfavorable upper-level winds. The agency said it will not issue any more outlooks on this system.

SoCalGas ended after a one-day run a high-linepack OFO for Tuesday that was belatedly announced Monday afternoon. Despite the eased restriction, the SoCal citygate was up only a couple of pennies after having recorded one of Monday's biggest jumps (35 cents), and IntercontinentalExchange (ICE) said citygate activity on its platform dived from 505,600 MMBtu Monday to 361,800 MMBtu Tuesday.

Despite weather trends turning slightly more bearish for gas, a Texas-based marketer said he thinks the cash market should be able to sustain at least one more day of modestly higher pricing Wednesday. His company still had some power generators in both the Northeast and South calling Tuesday for spot gas, he said.

June bidweek got a fairly slow start Tuesday, the marketer continued, but he reported early basis trading of Tennessee's 800 Line at minus 4 cents and of Transco Zone 4 at plus 2 cents. Based on the screen as it stands currently, it looks like slightly lower first-of-month June indexes, he said (Tuesday's prompt-month close was about 3 cents below the May settlement at $4.377).

Actually, ICE indicated a greater decline at the Chicago citygate, which averaged about $4.38 in initial trading on its platform, or 11 cents less than NGI's $4.49 May index. However, the Southern California border average of $4.28 on ICE Tuesday was more in line with futures guidance, being only about 3 cents down from May's $4.31 index.

Stephen Smith of Stephen Smith Energy Associates said he had slightly raised his original estimate of an 88 Bcf storage build for the week ending May 20 to 90 Bcf.

Credit Suisse analysts Hugh Li and Stefan Revielle anticipate a significantly larger injection of 98 Bcf, which they said would bring total working gas to 2,017 Bcf, or 240 Bcf before last year's level. "This week's storage projection compares to last year's 100 Bcf injection and a 96 Bcf five-year average..." they added.

Nominated volumes for Tuesday increased at a significant majority of the 23 trading locations covered by the Bentek Energy U.S. Natural Gas Hub Flows chart. Only seven of the points dropped, Bentek said, while Sumas recorded essentially no change. The biggest declines occurred at Columbia Gas, down 225,000 MMBtu (6%); Northern Natural-demarc, down 149,000 MMBtu (32%); and the PG&E citygate, down 135,000 MMBtu (5%). They were well outweighed by increases at Texas Eastern M-3, up 424,000 MMBtu (22%); Transco Zone 4, up 291,000 MMBtu (8%); the Chicago citygate, up 289,000 MMBtu (14%); Tennessee Zone 0, up 145,000 MMBtu (45%); and the Florida citygate, up 134,000 MMBtu (4%).

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