Unlike the East-West price movement division that markedFriday’s and Monday’s trading, the cash market returned Tuesday toa unified trend that resembled last Thursday’s: down considerably.

With few exceptions, price declines ranged from about a dime toa little more than 20 cents. The screen’s large drop Mondaycombined with mild futures softness for much of Tuesday morning’scash trading period were the chief reasons for the downturns,traders said. A heat wave continued across the southern tier ofstates, but outside of a few pockets of warmth in the Northeast, acold air mass moving southward from eastern Canada is keepingtemperatures mild in the key market areas of the Midwest and mostof the Northeast.

Because the screen started moving higher late in the morning foran eventual gain of slightly more than 4 cents, several sources areanticipating modest upticks today. Quotes were already trendinghigher as Tuesday’s trading proceeded. However, an eastern utilitybuyer said his prices were rising even before futures did, so hedidn’t think the screen had much influence. But a western-orientedmarketer said numbers were moving lower until getting a late liftfrom the screen. Crude oil and heating oil futures also werestrong, with the crude contract for August soaring more than adollar to nearly $32/bbl.

The Chicago citygate was registering its first sub-$4 numbers inalmost a month Tuesday. Although it averaged $4.10 in June 20 trading(see Daily GPI, June 21), quotes thatday went as low as $3.96. The last time deliveries averaged below $4was May 24, when Daily GPI posted a $3.99 index for the trading date.

The point that stood out most by falling only a couple of centsin highly volatile trading was the Southern California border. Thewide range of more than 50 cents was caused by $4.20s quotes intoPG&E’s system being widely surpassed by mostly $4.60s and$4.70s pricing into the SoCal Gas system.

One source explained the California market situation this way:”Border prices into PG&E [are depressed] because the PG&Ecitygate has been running below the border for some time now.”(Daily GPI indexes show that border prices into SoCal Gas haven’tbeen appreciably below the citygate PG&E since early June.)There is basically no border load from Northern California becauselately it’s been much cheaper to buy at the citygate, the sourcecontinued. The bulk of gas going into PG&E at Topock isprobably being re-routed back into SoCal’s system at Kern RiverStation. People who do that are paying the maximum transport rateof 24 cents-plus, but still make money with thePG&E-Topock/PG&E citygate spread at 40 cents or more likeit was Tuesday.

Another trader commented that PG&E-Topock prices “come underpressure from excess supply dumped into the market by a largecapacity holder on El Paso.” With the currentPG&E-Topock/citygate spread, it makes sense for holders ofPG&E’s Baja Path on-system capacity to buy at the border andmove to the citygate at variable charges of 26-28 cents, he said.”On the other side of the equation, there is a large marketer withincentive to keep SoCal-Topock prices as high as possible.” That isessentially propping up prices there, because border deliveriesinto SoCal at the Ehrenburg and Needles points are priced lowerthan at Topock, he said.

A little less than a day later than scheduled, Westcoast’s FortNelson Plant ramped up to 450 MMcf/d of processing capacity earlyTuesday morning. It’s expected to return to full capacity of morethan 600 MMcf/d early next week, a spokesman said. Curiously,Northwest domestic prices suffered even more from the influx offresh supplies than did those at Sumas, even though Westcoastchanged its daily imbalance tolerance range to 0/-20% to preventpacking the line. The bigger price drop for domestic gas likely wasrelated to Northwest not allowing on-system balancing in thesouthern half of its line, one source said.

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