Cash Prices continued their upward rally Tuesday, skyrocketingin excess of 20 cents at most delivery points. Most sources agreeda vigorous buying spree fueled by market players coming into theweek short in anticipation of lower prices was largely to blame forthe continued spikes in most areas.

A little bit more of what was going on Monday took placeTuesday, said a Midcontinent marketer. “There is obviously a littlebit cooler weather, but to run up 15 cents a day you have to becovering some shorts as well,” he added. “Last Friday, peopleexpected much lower prices for this week, and Demarc for examplewent out at $2.10 [Tuesday]. So they missed by about 60 cents andnow they’re trying to get back whole and watch out for the weathercoming in Wednesday, Thursday and Friday.”

A Houston-based trader who echoed the latter theory said it wasjust nuts out there. “It looked like the upcoming cold weather wasforcing some shorts, and demand was very strong. We’re expecting tohave 39 degrees [in Houston] for Thursday night and Fridaymorning.”

However, while marketers and producers were very active ineastern and Gulf Coast markets, “we saw LDCs back-off a little[Tuesday] when prices got a little salty,” one source said. “LDC’shave plenty of discretionary purchasing power and they have beenactive buyers over the last week.” Based on that rationale, thesource added that cash prices might have reached the upper end oftheir range on Tuesday. “Now the question becomes whether thefutures market will pull cash higher.”

Western and Rockies prices took a similar direction to otherseverywhere else. However, other factors helped boost gas prices insome of those areas. “Apparently there is little hydro generationavailable from the Pacific Northwest and a lot of utilities werebuying in Northern California and Washington,” one source said.”The Pacific Intertie is running below capacity because of fishflush and the lack of discretionary water for power generation,” headded. This was a factor that kept prices strong anywhere from thePacific Northwest, down to the Rockies and into the northernCalifornia border.

“I had people willing to pay $2.00 for Opal at the end oftrading today but I didn’t have the gas to sell,” another areamarketer said. He said almost all his customers were utilitiesbuying to fuel their gas-fired turbines. “They needed alternategeneration and that boosted the demand for gas. “

“Prices should soften a little bit for the weekend,” said a GulfCoast aggregator. “In addition to the typical low weekend demand,it is not expected to be as cold,” he added. “I wouldn’t besurprised to see softer prices for Friday’s delivery.” Then onMonday some expect a convergence of October and November prices,indicating the direction prices should take through next week.

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