For the cash gas market, apparently the moderate screen weakness on Wednesday trumped a small increase in hot weather Thursday. Prices for Friday flow ranged from flat or slightly higher at some points in the West to down nearly 20 cents.

Unseasonably cool weather in the Pacific Northwest and Upper Midwest, and to a lesser extent in New England, was starting to recede a bit, and daily highs in the South crept up a degree or two. But any incremental gain in power generation load was insufficient to keep a floor under prices at most points.

The Energy Information Administration reported that 109 Bcf was injected into storage last week. The volume exceeded most prior expectations, and prompted Nymex traders to send August gas futures 18.5 cents lower on the day. For a change the gas contract was disassociated from oil-based futures, where reports on national inventories were mixed but decidedly less than the anticipated increase. Crude oil futures shot up more than a dollar to $40.33/bbl — the first settlement above $40 since June 1.

According to conventional wisdom, the mildly bearish storage news, screen decline, lower industrial weekend demand and falling numbers in late cash trading would have most people looking for further cash market softening Friday. But a Midwest marketer wasn’t so sure.

“Sure, there’s always a chance” of a rally Friday, he told NGI. “There’s enough panic in this marketplace for anything to happen.” He clarified that he didn’t expect a drastic run-up and couldn’t vouch for all regions, but said it’s possible for fundamental weather support to keep a floor under prices. There was little cooling demand in the Midwest for Friday, but it should be getting substantially hotter there over the weekend, he said. He added this caveat about expecting a modest rally: “That is, if the weather forecasts come in.”

The marketer said he “tried to find a find a home for my gas as early as possible,” which turned out to be a good move since prices were falling in late deals. He reported seeing ranges of about 15 cents. Despite Thursday’s screen drop into the $6.10s, the marketer commented, “I have a hard time thinking we’re going to get under $6” in futures.

An intrastate Texas trader said cash had been “strange” for the last week or so, starting weak to the screen and then strengthening, but Thursday it was the other way around. He found it “interesting” how inventory reports Thursday morning boosted crude oil big-time, but natural gas futures failed to follow as they often have in recent weeks. One reason why the advent of normal hot summer weather in Texas hasn’t translated into big gains in intrastate prices is that several of the state’s electric utilities are running out of storage capacity, so they’re starting to make some withdrawals. After all, their generation loads tend to be lighter in winter than in summer, he noted.

Permian Basin/Waha gas must have been going mostly west and north, the trader said, because the intrastate Texas market was on the light side and there’s still no capacity available for taking Waha gas east for those that don’t already hold the capacity.

Not only did El Paso continue a low-linepack OFO Thursday, but triple-digit temperatures persisted in most of the desert Southwest and fires threatened parts of the Arizona Public Service transmission system. That helped produce the few instances of flat quotes and most of the smaller losses in the West. In a bulletin board posting, El Paso said the “increase of southern Arizona power generation loads may continue for several more days and, given current linepack trends, so may the Unauthorized Overpull [Penalty] alert. Due to increased demand coupled with the Wenden turbine failure, our North to South capacity is fully utilized.” It provided a summary of possible available capacity on its system “as an aid to our customers who are attempting to schedule gas to serve Southern System loads.”

©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.