The cash market overall Tuesday was on average a penny higher with mild strength evident in most regions. More than a handful of Northeast points weakened. Futures found the rarefied air of Monday's gains unsustainable and recorded a double-digit loss. At the close August had dropped 14.6 cents to $2.737 and September had lost 14.8 cents to $2.728. August crude oil dropped $2.08 to $83.91/bbl.

Weakness at northeast points was seen as a weather response. "It's a mild 79 to 80 degrees [in Boston], and that's probably a heat wave for most of those guys, but it is just normal," said an eastern marketer.

"They are doing some allocations on Tennessee, otherwise prices would be even lower. They are doing maintenance on Tennessee until mid-August and you can still move gas if you have firm transportation and are using primary path, but if you have to go to a different cycle, you will probably not get transportation."

He added that Tennessee Zone 6 200 L and Algonquin Citygate were both trading around $3.40 and he expected that to continue Wednesday. "I see the weather improving a little temperature-wise and getting a little stronger by Thursday. Certainly, Friday looks a little stronger, but Friday tends to be a down day because demand drops off. Then you've got the weekend [Boston] at 85 to 86, and you've got mid to high 90s for a couple of days."

Temperatures farther south are also important. "New York drives the market as much as Boston, and you've got highs in the upper 80s to mid 90s in New York next week and hangs out in the upper 80s for the rest of the month. That should firm up Transco Zone 6 New York and Tetco M-3 a little bit as power demand kicks in."

Quotes on Algonquin fell over a nickel, and deliveries to Iroquois Waddington shed nearly a dime. Gas on Tennessee Zone 6 200 L tumbled nearly 15 cents.

Buyers on Florida pipelines were having to endure allocations and high prices as power generation loads surged. "Florida Gas Transmission is allocating right at the beginning of Zone 3, but I don't think they have any maintenance considerations," said a Florida utility buyer.

He added that elevated heat was likely to keep the allocations in place and without them the pipeline would probably be oversubscribed. "With the allocations we go to other pipelines as well as storage and we have some primary transportation in Zone 1 and Zone 2 and use every dekatherm of that and try and buy as little of Zone 3 as possible.

"I think the heat and high gas usage is going to continue and not go anywhere. He added that there were only two pipelines into Florida from the west, and "Their delivery points are very limited and not anyone can go and pull the gas off. You just have to grin and bear it."

Gulf points generally firmed. Florida Gas Transmission Zone 3 gained a couple of pennies to put it well above $3, but Henry Hub -- which was about 40 cents lower than that -- added close to a dime Tuesday. Tennessee 500 L added a few pennies and both ANR SE and Columbia Gulf Mainline gained close to a nickel.

Points in South Texas were generally firm, but Transco reported that from July 10 to July 13 additional work would be needed at its Station 30 delivery point. Quotes at Station 30 fell 15 cents, but NGPL S TX was about a nickel higher. Carthage was flat, but Katy added more than a nickel, and the Houston Ship Channel gained close to a dime.

Futures traders see the day's decline as symptomatic of losses to come. "We broke through $2.82 and then $2.75 was another support level. It looks like we are headed to the $2.62 to $2.65 area over the next day or two. We broke two support levels," said a New York floor trader. "I think we'll come in a little bit lower tomorrow."

A lower open tomorrow will likely pale in comparison to market adjustments in store for northeast and eastern markets as Marcellus production kicks in. If analysts are correct, the expected volumes coming out of the Marcellus Shale have the potential to turn supply and consumption patterns in the Northeast on their ear. "Over the next five years, natural gas production in the Marcellus is expected to double, from just less than 8 Bcf/d today up to almost 16 Bcf/d in 2016," said Rusty Braziel in his blog at RBNEnergy.com.

The big question becomes what happens to traditional supply patterns and where does all that extra gas go? "As that production enters the market, volumes that have traditionally served the Northeast market from LNG imports, Canadian imports, inflows from the Rockies/Midwest, and inflows from the Gulf will no longer be needed."

Braziel contends that by winter 2016 things will be vastly different.

Utilizing a Bentek Energy LLC flow model, Braziel demonstrates that regional Northeast production last winter "averaged 6.9 Bcf/d, Canadian imports were 1.3 Bcf/d, the region received 1.5 Bcf/d from the Rockies/Midcontinent and another 6.2 Bcf/d from the Southeast/Gulf region. Storage made up 2.9 Bcf/d of supply for the season, and there was a tiny volume of LNG imports. In total, it was an average demand of about 19 Bcf/d."

So what happens when another 8 Bcf/d comes on stream from the Marcellus by 2016?

Braziel said, "there will no longer be a need for any LNG imports, Canadian imports, inflows from the Rockies/Midcontinent, or eventually even from the Gulf. By 2016, most of these flows will be history except for some inflows from the Gulf during the winter months."

According to his calculations, "With zero inflows from the Midcontinent/Rockies, 1.5 Bcf/d from the Gulf and 2.0 Bcf/d out of storage, the market balances. Just a couple of years ago, 8.5 Bcf/d flowed into the Northeast from the Gulf during the winter months. After the great reversal, this number is down to 1.5 Bcf/d and could certainly continue lower. Winter flows on REX into Ohio are zero. Utilization of storage capacity has declined -- gas supplies are right next door."

Is that a natural gas SUV in my neighbor's driveway? The times they are a changin'.

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