Those of a bullish bent found encouragement all around Tuesday:July natural gas futures challenged unprecedented heights whilecrude oil futures edged back above $32/bbl; heat waves challengedelectric grid operators in both the East and West; and priorestimates of this afternoon’s storage report indicated a consensusthat the year-on-year deficit will just keep growing and adding tothe refill challenge.

No wonder, then, that nearly all cash points registereddouble-digit increases yesterday amid expectations of more to come.”I would turn bearish on this market except I have not once had anydifficulty placing supply at these prices,” said a Midcontinentmarketer. “Plus, we haven’t had any true peak days yet.”

And a Northeast buyer commented, “These high prices don’t botherus much at all. We were playing the margins by buying Texas EasternM-3 and Tennessee Zone 5 below $5 and transporting it to New York[Transco Zone 6-NYC pool] to sell in the $5.10s.”

One trader noted El Paso-Permian gas getting premium pricesaround $4.50 “going both east and west.” In fact, said anothersource, for a while Permian was priced above Katy. “The pricinganomaly was predicated by a temperature anomaly,” she said.

Up till this week, heat waves on the East and West Coasts hadbeen striking in separate time periods during May and in mid-June.It was double trouble time Tuesday, though.

Sounding somewhat like a contented gardener, a large aggregatorcommented, “It’s lots of fun feeding all those hungry power plants”in California. Although the state’s main distributors did not issueOFOs, PG&E apparently was feeling the effects of the big gaspull as it projected below-target linepack for Thursday.

The California Independent System Operator progressed fromissuing a Tuesday Power Watch notice to declaring a Stage OneEmergency and then stepping it up to a Stage Two Emergency thatafternoon. PG&E, Southern California Edison and San Diego Gas& Electric were asked to activate voluntary load managementprograms in phases to maintain an operating power reserve of atleast 5%.

It wasn’t just California heat exacerbating the situation. Thedesert Southwest was at its normal scorching levels, but the realkicker was unusually high temperatures in the Pacific Northwest,Cal-ISO said. Portland, OR temperatures might set a record, itsaid.

Electricity traders reacted by pushing same-day hourly peakingprices reported by the California Power Exchange (CalPX) to justover $1,071/MWh at one point. Next-day trading was a little moresubdued but still was around $750 over a five-hour period today.

The situation wasn’t quite as critical back east. ISO NewEngland issued a Power Watch advisory during the morning rush hour,citing anticipated high electric demand, but was able to lift theadvisory around mid-afternoon. The ISO said “Ten-MinuteNon-Spinning Reserve” prices in the New England Power Pool got ashigh as $1,000, but topped out a little over $343 on an hourlybasis.

Predictions of AGA’s storage injection figure mostly ranged fromthe mid 60s [Bcf] to around 80 Bcf, tending to parallel the resultsof the last couple of weeks. What is most important, though, saidone trader, is the way Nymex reacts afterward, and because thestorage deficit likely will grow he expected more firmness.

Again, as futures rose July basis weakened. A buyer who had doneChicago financial basis at a plus 6.25-7 range Monday was makingdeals Tuesday at plus 4.75-5.5. A Northeast trader reported TranscoZone 6-NYC physical basis at plus 50 and Texas Eastern M-3 at plus36-37. Midcontinent pipes mostly were minus 17-19 withNGPL-Midcontinent a bit weaker at minus 20-21.5, a marketer said.

Not many people were willing to do fixed prices at Malin, said amarketer, but she was able to complete a couple of deals in the$4.50s. Other fixed-price quotes for July included Waha at$4.55-57, Southern California border at $4.99-5.04 and Kingsgatearound $4.10.

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