Wednesday’s suspicions that a weeklong run-up in cash prices,which hesitated only on Monday before starting to climb again, wascoming to an end proved well founded Thursday. A sharply droppingscreen, the continued lack of any significant storm threat toproduction and mild weather in the major market areas of theMidwest and Northeast combined to pull down eastern quotes byamounts on either side of a dime. Declines tended to be smaller inthe West, ranging from flat at a few Rockies points to as much as 8cents in the Northern California market.

Dennis got upgraded to hurricane status Thursday but still wasconsidered unlikely to enter the Gulf of Mexico. Instead, oneforecasting service expected Dennis to go ashore in the Carolinasafter passing the Bahamas. Tropical Storm Emily was approaching theLeeward Islands in the eastern Caribbean while TS Cindy remained inthe mid-Atlantic.

Pacific Gas & Electric was projecting below-target linepacklevels for today through Sunday but elected not to extend alow-inventory OFO beyond Thursday’s gas day. That caused a fairlywide range at the PG&E citygate, one buyer said, because sometrades were done early in the high $3.00s and then quotes plungedby about a dime after traders learned the utility wasn’t going torenew the OFO. California prices fell overall despite brush firesin Northern California and high temperatures prompting theCalifornia Independent System Operator to declare a Stage OneElectrical Emergency, asking consumers to voluntarily reduceelectricity use.

September bidweek prices weakened along with futures, as couldbe expected. The lower screen caused general Midcontinent basis totighten from minus 12-13 Wednesday to minus 10-11 Thursday, amarketer said. Another source noted that “basis seems to be comingback down to earth” in the Northeast, reporting tightened plusbasis of 23-24 for Transco Zone 6-NYC, 21.5-22 for Texas EasternM-3, 14.5 for TCO pool gas and 15-15.5 for CNG.

According to a Midcontinent trader, several larger marketersappear willing to take their September futures contracts toexpiration and then take physical delivery at Henry Hub. By doingso, they take precautions against force majeure supply situationsthat could arise from potential hurricane-related shut-ins duringthe month, he said. That may have a double effect, the tradercontinued. “First, it helps protect futures from from a possibleexpiration day [Monday] sell-off. Second, it could cause cashprices at Gulf Coast points other than the Hub to fall because ofreduced demand. After all, there is nothing firmer than firm,” heconcluding, meaning that physical Henry Hub deliveries tied tofutures are guaranteed by Nymex.

There was some evidence of his second assertion being correctThursday as some Gulf pipes were fetching index premiums of onlyabout 0.25 cents when they usually trade at index plus 0.5 cents ormore.

A marketer said the Southern California border was “welloffered” in the mid $2.90s although he wasn’t aware of anyfixed-price deals there yet. Fixed-price reports included Malin inthe mid $2.60s and Northern Natural-demarc in the mid $2.80s.

A marketer planning to enter September with a flat position toldDaily GPI: “With the screen dropping today [Thursday], some peoplethink it’s a good opportunity to go short. I don’t think so.Eventually hurricane season will rear its ugly head again, and thenthose people will be wishing they were long.”

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