On a day that had virtually all traders mesmerized by the hemorrhaging of merchant energy values on Wall Street (see related stories), cash gas prices were mostly lower by small amounts Tuesday. Mild gains of a nickel or less at a few western points (intra-Alberta, Sumas and Kern River) were the exceptions to flat to as much as 40 cents lower (Transco Zone 6-NYC) numbers elsewhere.

It was mostly cooler weather arriving or approaching in northern market areas that pulled nearly all points down, sources said. “It’s getting pretty cool for tomorrow [Wednesday] in the Northeast, and that’s pretty much the story in today’s plunging citygates,” according to one marketer. Even the northern half of the South is expected to get some relief from the heat Wednesday, he added.

The milder weather outlook for the rest of the week, along with weakness in the energy futures complex, led several traders to anticipate further price drops Wednesday. “I was surprised that Gulf Coast cash held up as strongly as it did” with declines mostly in single digits, a regional trader said. With the Northeast, and to a lesser extent Midwest, cooling demand lessening, he had no doubt that Gulf Coast weakness will become more pronounced. Another negative signal was sharp drops in eastern power prices for Wednesday flow, he pointed out.

A western marketer was a bit puzzled about why California points fell about a dime, while Rockies points tended to be flat to down only a tad, saying Golden State power generation load hadn’t fallen off significantly. However, a South Mainline constraint on El Paso was due to start Tuesday, and that probably contributed to San Juan Basin weakness, he said.

“I think bidweek will be an even slower starter than usual,” an aggregator told NGI. People are unlikely to do much ahead of the weekend, but then activity should get hot and heavy next Monday and Tuesday because traders will have fresh weather forecasts and the Nymex settlement in hand, he added. There won’t be new storage data to await since EIA won’t report until after August trading is completed.

One trader reported doing an August Tennessee 500 Leg basis deal at the Nymex settlement, minus 7.75 cents. Barring any radical screen change, we should see index plunges of about 40 cents or so based primarily on the Nymex dropoff from July’s $3.278 settlement to Tuesday’s close at just under $2.90, he said.

A western marketer reported seeing a few discount-to-index deals so far for August, and said they were getting weaker. Border-SoCal had moved from index minus 1 cent to minus 2.5 cents Tuesday, while the PG&E citygate went from index minus 1.5 cents to minus 3 cents.

With swing business on the fairly quiet side and it being a little early for serious August activity, sources had time to reflect on the day’s battering of many energy sector stocks. “That’s just about all anybody is doing this afternoon, watching this stock market mess,” said one western trader. Whether they work for the affected companies or not, people have got to wonder when the overall industry bleeding will stop, he said.

“I don’t even want to talk,” a Gulf Coast marketer started out, but then continued. “It’s sickening how merchant energy companies are getting punished so badly. It’s beyond my comprehension.” A lot of traders have to be afraid for their jobs in this kind of atmosphere, he said. The marketer added that he had to think back to something Ken Lay said as Enron unraveled [paraphrased]: “If Wall Street and the press hadn’t vilified us so badly, I think we could have gotten by.” He didn’t want to comment on whether Enron deserved vilification.

The situation is really starting to look Enronesque, a producer said. He expressed relief that members of the producer community “with hard asset backing have been able to stay under the scandal radar scope,” but added that of course, Dynegy also has hard assets but isn’t getting spared.

One veteran industry watcher said the stock market simply has come to the conclusion that the days of large profits to be made by mega-marketers, who use their control of large volumes for speculative day-trading, are over. “You can speculate in the futures market, but you can’t expect to sustain that strategy forever in the physical market,” he said.

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