Prices kept falling Wednesday, but the declines wereconsiderably more moderate than the previous day’s plunges.Dollar-plus drops at the Northern California points (Malin andPG&E citygate) were the only remaining vestiges of the marketrout that had appeared to be developing Tuesday. All non-Californiapoints ranged from flat to down about a dollar.

With a bearish fundamentals picture essentially unchanged,sources could point to little beyond a firmer screen to explain whycash market softness had slowed down so radically. One traderperceived it as the beginnings of late-month cash/futuresconvergence. With the February futures contract rising to $7.115,either the screen will have to retreat or cash must rally tocomplete the process, he said.

However, an eastern utility buyer still had troubleunderstanding why prices weren’t still going down in big amounts.”We’re in a low-demand period with the weather unseasonably mildfor late January,” he said.

A Midwestern marketer said gas around $7 “seems like a bargainwhen you’ve gotten used to $10 area pricing.” He reported noticinga company report from last August that contained a note about theJanuary 2001 futures contract trading at less than $5 at the time.”But the sentiment at the beginning of last fall was ‘these numberscan’t possibly hold up,’ so nobody locked in prices back then,” hesaid.

Although Henry Hub was quoted as high as $7.02, the averagethere was about a dime less. It was the first time the Hub averagedbelow $7 since the beginning of December.

Once again Nymex traders puzzled some cash traders with abullish reaction to what seemed to be an obviously bearish storagereport. AGA said only 90 Bcf got withdrawn last week, which wasless than half the year-ago volume. Yet the screen realized most ofits gain after the report was issued.

Although lower gas prices are expected to eventually resolve thecurrent economic problems in processing, those problems are stillaround. Texaco’s Henry Hub plant and the adjoining Erath interconnectswith NGPL and Sea Robin were among 11 South Louisiana points whereColumbia Gulf said it will begin refusing nominations because ofreceipts exceeding its 1,050-Btu limitation (see Daily GPI, Jan. 22).

One good indicator of how radically the market mood has changedsince last month is that Sonat estimated its cumulative systemcash-out imbalance at 392,116 dekatherms long as of Jan. 22.Through the end of December Sonat shippers had racked up acumulative imbalance that was about 1 Bcf short.

A Gulf Coast trader reported February basis of plus 3.5 forTransco Station 65 and plus 0.5 for TGT Zone SL. It was rathersurprising to see TGT with a positive basis figure, he said.

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