Prices continued to rise at nearly all eastern points Tuesday, although by considerably smaller amounts than the soaring numbers seen the day before. However, a few touches of flatness were surfacing in the East, and a couple of Midcontinent pipes recorded drops of about a nickel.

Waha and El Paso-Permian quotes, aided by continued heavy air conditioning load in the intrastate Texas and Midcontinent markets, joined the eastern majority with modest gains. The rest of the West, where temperatures outside the desert Southwest are tending to run a little below normal and thus keeping cooling demand minimized, ranged from flat to down about 15 cents.

As a Midcontinent marketer had surmised Monday, most of the price-boosting effect from this week’s higher temperatures had already been used up in that day’s price gains that often exceeded 40 cents, leading him to correctly predict modest firmness Tuesday (see Daily GPI, June 7). Even a 24.2-cent screen advance on Monday had less impact on next-day cash prices than usual. And energy futures support for the cash market was fading; the natural gas contract for July could only eke out a half-cent gain Tuesday, while Nymex’s petroleum-related offerings were all in retreat as traders expected bearish U.S. inventory reports to be issued Wednesday morning.

The East Coast, Southeast and Midcontinent are forecast to keep experiencing substantial highs in the 80s and 90s for the next day or two, which may allow pipes in those areas to stave off any softening Wednesday but will probably continue to limit new price increases. A stormy day is predicted for the Midwest, though, which will take some edge off the heat there.

As if to demonstrate the regional inconsistency of market conditions, a high-inventory OFO declaration by PG&E reflected an excess of supplies in the West, while on the opposite coast Florida Gas Transmission issued an Overage Alert Day notice as rising temperatures and the ensuing growth of power generation load in its Florida market area started to erode FGT linepack (see Transportation Notes).

A utility buyer in Florida said her company’s air conditioning load was growing enough that “I guess” FGT’s notice was justified. Once again, though, she regarded it as more of a cautionary prevention measure by the pipeline rather than a fix to any current problem.

A marketer in the Upper Midwest said her company was “absolutely disgusted” with current pricing. When told about the Energy Information Administration’s release of its latest short-term outlook indicating that prices will stay near $7 through the summer despite big storage inventories (see related story), she could only groan and say, “Oh, well.” Although a slight cooling off was approaching in the region, she said above average temperatures for early June are due to stick around for a while. “It’s getting up into the 80s now,” she said, “and I think that will cause quite a few air conditioners to get turned on.”

The marketer said her company was buying only the minimum amount of daily gas necessary to keep its clients happy, while hoping that lower prices aren’t too far off.

Ah, the tribulations of predicting weather. In a Tuesday advisory, the Weather 2000 consulting firm noted that despite its warning of such for months, “it was difficult to convince many of an impending hot summer (June-September), with a raw, cool May only alienating more believers. But here we are at the start of June with Newark, Cincinnati and Chicago all dancing around 90 [degrees F.] likely for four days. Several locations in the [Midcontinent] region like Memphis have even soared well into the 90s.

“However, we now wish to pull the reins of patience in the opposite direction. With most seasonal computer models having indicated a very cool or muted summer forecast for months, the outbreak of warmth has thrown them in a tizzy. Subsequently, short-term forecasters who banked on this cool summer have now slammed on the brakes in a rush to sound the heat bugle. And this of course leads to overcompensation in the opposite direction. Yes, it’s hot in many states; yes, the nights are muggy in many states; yes, this is the start of our net, hot summer, but it will not go unabated or uninterrupted.”

Weather 2000 said it expects the June-September 2005 period to see “many, many more CDDs” (cooling degree days) across the nation than in 2004, but more will occur toward July and August when the “truly impressive heat wave streaks will emerge. In the meantime, June will be anomalously warm (genuinely hot in the driest areas), but with enough fronts and atmospheric variability to ‘cool off’ recent hysteria prompted by those attempting to play catch-up.”

Ron Denhardt, an analyst with Massachusetts-based Strategic Energy & Economic Research Inc., said he expects a storage injection of 105 Bcf to be announced for the week ending June 3.

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