While power generation demand and constraints on El Paso in theSan Juan Basin kept Western and Rockies prices afloat, general lackof trading activity kept most other markets flat to down a coupleof cents.

In the third day of price increases in the Rockies, most pointsrose about three more cents. Hot weather and storage injectiondemand were partly to blame. “It is supposed to reach 100 degreesin Salt Lake City [today] and Denver is supposed to be in the 90s,”noted one marketer.

“We have 115 degrees in Phoenix and it is going to beapproaching 100 degrees in Los Angeles over the weekend,” saidanother marketer, noting Southwest and Pacific region power demandhas added significant support to gas prices because of spark-spreadopportunitites. “Power is trading at around $50/MW in California,which is the equivalent of about $5 gas. Any time these guys wantto turn on their gas fired generation they can buy the gas at $2.50at the southern California border, which basically equates to $25power, and then turn around and sell that power for $30. So it’s ashort-putt for them to buy gas, and that right there is increasingdemand for gas and keeping prices up,” the marketer explained.

The combination of the spark-spread play, an overpull penaltysituation at the Washington Ranch Storage facility (see Daily GPI,July 14), and the residual impact from scheduled outages on El Pasocould continue to buoy prices.

“[El Paso’s] linepack is so low that they are warning utilities,end-users, and LDCs not to pull more gas than they are nominating,”a source said. “This has been boosting prices at the supply basin.”An El Paso spokesman said there is still no projected date for whenthe penalty situation will expire.

In the Midcontinent, cash prices remained relatively firm atmost delivery points. One trader who reported a Northern NaturalMid-11 deal at $2.20/MMBtu said that pipe demonstrated the moststrength Wednesday. “Most of that gas is going to electricgeneration load in Texas and Oklahoma,” he said. “We’re pretty hotand we’re supposed to get hotter, so I suspect pipes that can gonorth or south for market will be stronger than those pipes thatonly go north.”

“It looks to me that prices have found a bottom,” said anotherMidcontinent trader. However, he added incremental demand is stilllagging and the only thing that could bring prices up right now isa Hurricane or supply interruptions. “I just don’t see a whole lotof people out there trying to buy and sell gas.”

A Gulf Coast marketer said the 93 Bcf in storage injections isa little bearish. “It was a little on the higher end of whateverybody expected.” The trader believes that cash prices couldtake another run on the downside following the Nymex screen. “Ithink that with the lackluster cash trading out there, you couldsee the screen pushed down. It may not stay down, but I think itcould take a run at the teens.”

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