Cool fall weather and rapid breakdown of the storm formerlyknown as Hurricane Gordon were enough to take the wind out of thecash market’s sails yesterday as prices plummeted across the board.

Less than 100 MMcf/d of Mobile Bay gas production was curtailedfor less than a full 24 hours on Saturday, as Gordon quickly veeredright and made a relatively soft and wet landing on the Gulf Coastside of the Florida Panhandle. As a result, last week’s pricestrength immediately eroded Monday morning.

Large drops of 20 cents or more were felt in a number of supplybasins, particularly in the Gulf Coast and Rocky Mountain regions.The smallest declines were seen in California where hot weathercontinued to provide market support.

However, the spot market was unable to ignore the apparentlyillogical late run-up in futures prices. “Obviously the big thingtoday was that oil and gas on the Nymex were going againsteverything in the physical market. The loads on our system in WestTexas were way off over the weekend. They burned maybe 60-65% ofwhat they projected,” said one marketer. “There was very littleinterest to buy in Texas. Cal Border was the only place there wasenough strength to prevent a major decline.”

He said he went into the weekend with prices at Waha on Fridayat or above $5.20, but started out this morning around $5 and sawprices drop down to $4.90 before coming back up to close to $5 inreaction to the futures spike.

“The things that are keeping prices up in California are thecooling load and I think the food processors are still goingstrong. You have Palo Verde power trading $225/MWh. At the bordertoday we traded down to $6.35.”

Traders generally were perplexed at the late strength in cashgiven the failure of the storm and the mild weather.

“Initially this morning everybody was bearish, and prices cameoff hard. But I think they are looking at the possibility of moretropical development below Cuba. Today they feel there’s definitelya good chance of it developing into something.”

In a mid-afternoon tropical disturbance statement, the NationalHurricane Center reported that a tropical wave near Hispaniola, theremnants of Tropical Depression 12, could return to a tropicaldepression late Monday night or Tuesday after it moves away fromland. The wave is expected to move west at 15 to 20 mph.

“As soon as we saw that, we saw prices run up 6-7 cents at theHenry Hub. That was enough to push everything through some stops,and now people are getting bullish. Everything went off verystrong. I think people are trying to get as much gas in the groundas possible. They are little worried. They may not get as lucky onthe next set of storms that come.”

Despite losing ground early yesterday, Chicago prices ended theday strong. “The winter basis is strong,” said one observer.”Everything in the Midcontinent is getting stronger even though thescreen is going up; that is very bullish. The winter basis strip atChicago is trading around plus 17 cents. Probably two weeks ago itwas trading around 11 cents. We are going so short in storage,things are ready to take off again. Seems like there was heavybuying from LDCs even though the weather loads have kicked off inTexas and Louisiana. We just assume the gas is going in the round.”

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