High temperatures in the 80s across most of country east of the Rockies prompted some stronger power generation loads on Tuesday and prices were bumped up anywhere from a few cents to as much as a quarter, but several sources said they expected the market to weaken later in the week as temperatures returned to normal. Storage injection demand, however, should continued to provide price support.

“We saw Transco Zone 6 in the high $7.50s to low $7.60s for the most part and Tetco M3 also was around there. People are injecting and they are calling for 80-85 degrees in some parts of the Northeast again on Wednesday. We have a lot of gas-fired generation demand,” said a regional marketer. “There are a handful of nukes out in the Northeast, most notably Millstone, which Dominion shut down on Sunday. For the most part, the temperature increase was the driver behind prices being up today. The screen didn’t provide much help.”

The May gas futures contract ended up 9.5 cents at $7.045, but the rest of the petroleum futures complex gained substantial ground despite relatively bearish fundamentals. May crude settled $1.92 higher at $52.29/bbl. That’s positive news for the bulls but they will have to hold off the effects of below normal temperatures later this week.

Storage players still have a solid contango market in their favor with about a $1.30 spread between near-month futures and the January 2006 contract. That is more than adequate to cover monthly storage costs. “Spreads are still advantageous to injections,” noted a Gulf Coast trader. “But we expect prices to come off closer to the weekend. I would expect we’d lose at least 10-20 cents with Transco Zone 6 staying about 50 cents over the Henry Hub and the hub being back in the $6.80s at least.”

Henry traded a few cents on either side of $7 on Tuesday, up about a nickle from Monday’s levels. Most other Louisiana points also traded in the $6.90s and low $7s and were among the nation’s smallest daily gainers. Texas points posted some of the biggest daily gains, with increases of 10-15 cents on average. Chicago and the Midcontinent saw similar 10-15 cent increases. In the Rockies, most spot prices averaged in the $6.30s and $6.40s except Questar and Northwest South of Green River, which posted the nation’s lows in the $6.20s and $6.10s, respectively.

Early gas storage predictions from some analysts call for an injection of between 40 and 60 Bcf with most predictions in the high 40s. ICAP’s implied market forecast for the injection in the Energy Information Administration’s weekly gas storage report currently is a 45 Bcf injection, which would compare with a 28 Bcf injection last year and would further increase the gas storage surplus.

“We’re filling storage pretty good these days,” said a buyer for Northeastern gas utility. “We’ve been bumping up against injection limits. Tomorrow the weather here will moderate a little so we’ll see less generation demand and probably will be injecting as much possible again. Our models are telling us we should be buying May gas right now.”

Citigroup analyst Kyle Cooper said that he expects injections this month to exceed the five-year average by as much as 50 Bcf. “The futures market may very well ignore the physical storage realities and huge cash discounts may again be witnessed this year if above average injections continue,” Cooper said in his PM Gas Market Commentary.

The National Weather Service’s latest six to 10-day forecast shows an area of below normal temperatures extending from the Rockies east with a small area of above normal temperatures in the Pacific Northwest and the rest of the West at normal.

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