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Market Posts Higher Quotes at Most Points

Prospects of greater heat levels returning this week had prices rebounding at a large majority of trading locations Monday. The previous Friday's rise of 3.6 cents by prompt-month futures and the return of industrial load from its usual weekend decline were additional minor bullish factors.

A few scattered flat points, primarily in the temporarily cooling Midwest, were left out of gains ranging from 2-3 cents to about 20 cents.

July futures spent their next-to-last day on the board being supportive of next-day cash numbers with a further advance of 2.7 cents (see related story).

The Northern Natural Gas bulletin board indicated something of a mini-heat wave due in its Upper Midwest market area. With a normal system weighted temperature of 71 at this time of year, the pipeline projects its average going from a rather chilly 67 Monday to 70 Tuesday, 76 Wednesday and 83 Thursday.

Despite The Weather Channel's (TWC) prediction of "cold" fronts moving into the Northeast and South, highs in the 90s were prominent in the South's outlook for Tuesday, and TWC said most of the Northeast would peak in the 80s. The West Coast will remain cool for a while longer, but the interior West is feeling the heat, with Phoenix expected to reach the mid 110s while Denver sees a major jump into the low 90s, according to Madison, WI-based Weather Central.

There was no doubt that many, if not all, of the Lone Star State's peaking gas-fired generation units were running all out. The Electric Reliability Council of Texas appealed to consumers and businesses to reduce their electricity use between 3 p.m. and 7 p.m. Monday due to record high temperatures and unexpected generation outages. "The temperature is hotter than usual for this time of year, and we lost several generation units earlier today," said Kent Saathoff, vice president of grid operations and system planning.

Although a minor cooling trend will be in effect Tuesday in Texas, highs approaching 100 in much of the state are likely to keep many gas power facilities running. Quotes were up about a nickel at both Houston Ship Channel and the Katy Hub.

Tennessee, Transco and Southern California Gas have ended OFOs or other actions to guard against high linepack (see Transportation Notes). The OFO elimination was a factor in SoCal citygates recording Monday's top increase (However, although the notice didn't come out until Monday afternoon -- much too late to affect that day's cash trading -- the giant LDC issued a new high-linepack OFO for Tuesday).

However, Florida Gas Transmission's (FGT) ending an Overage Alert Day during the weekend was followed Monday by Gulfstream Natural Gas saying linepack was at the high end of its acceptable operating levels. "Gulfstream hereby notifies its shippers that at the current linepack level Gulfstream cannot absorb a significant quantity of underdeliveries of gas," the pipeline added. But although FGT Zone 3 in the production area was one of the few flat points, FGT Zones 1 and 2 rose about a nickel each.

Atlantic tropical activity picked up a bit, but still had nothing to stir any interest in the gas market. The National Hurricane Center was monitoring a broad area of low pressure associated with a tropical wave over the eastern end of Mexico's Bay of Campeche Monday. However, the agency gave it only 30% odds of developing into a tropical cyclone over the succeeding 48 hours and said it was expected to continue to bring locally heavy rains and gusty winds to portions of eastern Mexico and Central America as it moved slowly west-northwestward.

A Midwest utility buyer said massive regional flooding had not damaged any of his company's facilities, but it had lost several customers temporarily due to their gas and electric service being turned off when they were forced to evacuate by the floodwaters.

The utility is seeing very little cooling load currently with highs reaching only the upper 70s Monday; "a bunch of rain is keeping us fairly cool" for now, he said. But it should received a considerable boost in generation demand when it's forecast to get up to around 99 toward Thursday, he added.

The National Weather Service (NWS) sees most of the nation's warmer weather shifting westward during the period straddling the Fourth of July weekend. In its forecast for July 2-6, the agency predicted above-normal temperatures occupying the entire West through the central Dakotas and Nebraska in the north and extending from the Gulf Coast through the upper reaches of the South to the South Atlantic coast (including Virginia). The only areas where below-normal readings are expected are in Maine and peninsular Florida, while the southern tip of Texas and most of the Midwest and Northeast can expect normal conditions, NWS said.

Active gas-directed drilling rigs rose by three during the week ending June 24, according to the Baker Hughes Rotary Rig Count. Three were added onshore while there was no change in the Gulf of Mexico, Baker Hughes said. Its latest tally is 1% lower than a month ago and down 9% from the year-earlier level.

Canaccord Genuity analysts said the small increase in the Baker Hughes count put an end to a two-week and 17-rig losing streak. Year-to-date, the gas rig count has declined 46 rigs, or by 1.8 rigs on average per week, they said, adding, "The trajectory of rig declines thus far suggests it may be tough for the gas rig count to meet our expectation of sub-800 rigs by year-end. Should the resiliency in gas-directed drilling activity persist, our expectation of an already robust [about] 3.5 Bcf/d of U.S. production growth this year could prove conservative."

IntercontinentalExchange indicated rising bidweek numbers Monday at the SoCal citygate and PG&E citygate, saying they were up about 6-7 cents from Friday levels on its platform to average about $4.49 and $4.58, respectively.

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