The cash market separated on a rough geographical split in Friday’s trading for the weekend, with eastern points tending to range from flat to 20 cents higher, while flat to barely lower numbers in the unusually sultry Pacific Northwest belied overall western softness in which losses went as high as about half a dollar.

One source attributed the East’s advances primarily to forecasts indicating that Southern air conditioning load would be rising to levels closer to normal for the time of year by early this week. Although no such development is likely for the northern market areas, he said, their price hikes reflected storage injection competition for supply with power generation interests in the South (not to mention those also putting storage gas away in that region).

A natural gas screen that fluctuated slightly to either side of flat, provided no guidance to the cash market, the source continued, although crude oil and heating oil futures recorded sizeable gains. The July crude contract went back above $31/bbl as traders expressed uncertainty about a pending OPEC move on whether to cut production or not.

As predicted, the Northeast was feeling an uncustomary bit of extra warmth on Friday, according to a regional utility buyer who said he was taking advantage of it “to go fishing this afternoon.” However, rains were expected to cool things off again over the weekend, he added.

On-again, off-again OFOs were the main issues for a western trader who noted that PG&E issued a new high-linepack OFO for Saturday while SoCalGas declined to extend Friday’s Overnominations Day notice (see Transportation Notes). “We came off a real hot spell last week, but now most of California is quite mild,” even the inland sections, he said. The western price softness created good opportunities for storage buying, the marketer added. “Some people have a perception that the West has no refill issues and has kept up well [in comparison to eastern deficits], but we’re still putting gas into storage like there’s no tomorrow.” Both SoCal and PG&E have their storage facilities less than half full at this point, he said.

One quiet development from the May 1 start-up of the Kern River expansion has been the elimination of Kemmerer (WY) Compressor Station as a northbound bottleneck on Northwest Pipeline, a marketer pointed out. It seems strange after years of the pipeline constantly warning about Kemmerer overnominations and using measures such as OFOs and Declared Deficiency Periods to keep them manageable, but now nominations at the station are running well under nominal capacity of about 457 MMcf/d, he said. In addition, in recent weeks Northwest has been able to turn off the mobile compression it installed at Kemmerer to boost its flow capability.

The reason for the Kemmerer change is that Kern River’s big increase in Rockies takeaway capacity means Opal and other Rockies points have gotten more expensive in relation to Sumas, the marketer said. As recently as Thursday Northwest domestic averaged 6 cents above Sumas, in great contrast to times in the last few years when Sumas has commanded multi-dollar premiums, he went on (Friday’s Pacific Northwest strength combined with Rockies softness to restore a premium to Sumas at least temporarily).

Kemmerer probably will return to bottleneck status at times in the future, such as when Williams Field Services finishes installing a new processing facility at Opal, he said, “but I don’t think that would happen until next spring. Winter load should keep Kemmerer from being a problem again until then.” Probably Kemmerer will be a summer-only bottleneck in the future, he concluded.

Fuel switching remains a potential gas price depressant, said a trader who reported that one of his regular customers was buying only half his usual amount of gas in June “because he’s burning oil.” The trader noted recent Gulf Coast resid prices of $3.50/MMBtu as the approximate burnertip-equivalent for gas. Of course, into-pipe Gulf Coast numbers are well over $2 above that level currently, so gas is no competition at all, he noted. Even the recent strength in crude oil futures is not eating away significantly at resid costs yet, he said.

The Energy Information Administration is predicting oil use for power generation will increase 28% this summer as oil units are run longer and harder than those burning high-priced natural gas (see related story, this issue).

Analyst Kyle Cooper of Citigroup said his initial estimation for this week’s storage report “looks for a build somewhere near 110 Bcf, but probably slightly lower.” This would compare against numbers of 88 Bcf a year ago and a five-year average injection of 87 Bcf. “A build of 110 Bcf would place injections 26% above the five-year average, Cooper added.

He went on to remark that “from our electricity pricing data, not one of the six tracked locations currently supports running natural gas units. Midwest electricity prices are incredibly weak, with power prices equating to natural gas below $2.00, depending on the assumptions.”

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