Quotes for a long weekend that hadn’t been anticipated before last Monday (see Daily GPI, June 8) dropped as expected Thursday. A few essentially flat points in the Gulf Coast got stirred into declines ranging from about a nickel to more than 30 cents.

Most of the larger dips of 20 cents or more were concentrated in the Northeast, Permian/Waha and Southern California border markets, while the Gulf Coast tended to see the lion’s share of minor softness.

Sources had already pinpointed the day before why prices would move lower Thursday: receding cooling load, preceding futures weakness and the demand slump that typically accompanies a long weekend.

The screen finally managed to pull out of an extended slide on the day the Energy Information Administration estimated a storage injection of 102 Bcf for the week ended June 4. The volume was slightly higher than the middle of the range of prior expectations. About the time the report was released, natural gas futures began emerging from negative territory in early trading to an eventual daily gain of 9.4 cents. However, a cash trader said that was due to “following the oil” upward rather than reacting to what he considered a decidedly bearish storage report.

Rapidly filling storage is likely to emerge as a significant factor in pricing soon. Of immediate concern is a potentially bearish omen for the Pacific Northwest/Rockies market from Northwest Pipeline, which said available capacity at its Jackson Prairie storage facility had already dropped below a key threshold of 3 Bcf (see Transportation Notes). If the capacity is still less than 3 Bcf at the end of Sunday’s gas day, it will require interruptible customers to empty their accounts over seven days starting Tuesday. That not only would remove an outlet for new supplies but would throw a sizeable amount of gas into what may be an already weak market in that week-long period, a source noted. (A Northwest staffer estimated that interruptible storage volumes at Jackson Prairie totaled 1-1.2 Bcf as of midweek last week.)

In a similar vein, a marketer said the electric utilities in Texas still weren’t buying much gas due to milder June temperatures than usual, “but I’m seeing some storage demand.” However, he noted that like Jackson Prairie, storage at the Katy Hub in Texas is nearly full, and he thought “a bunch of facilities” around the country are in much the same situation with summer just beginning. It’s going to take an awful lot of summer heat to keep prices propped up when traders start losing their storage-stashing options well before the traditional injection season ends, he commented.

The marketer went on to add, “Our weather guy says Texas should be heating up pretty good next week.”

A Rockies producer had another reason besides storage to expect local-market bearishness in coming months. “A bunch of new fields and compressors have come online in 2004, and most of the pipelines are getting close to full,” he said. “We are going to have more gas than we can push any day now. But there are pipeline expansions being planned already.” However, he expected that by 2005 Rockies prices will have seesawed back up.

“We’ve definitely gotten cooler; in fact, today’s a little chilly and rainy,” said a Northeast utility buyer. He was unsure whether Thursday’s strength in energy futures would be enough to generate a cash rally Monday, but said, “I hope prices continue to fall because they’re still too high.”

But a couple of production-area sources reported late run-ups in cash. “There was a pretty good jump of 20 cents or so near the end, starting just after the storage report came out,” a Gulf Coast marketer said. Of course, not much cash trading was left to be done by then, but it could be a signal of higher prices Monday, he added. “To me, the late rebound was pretty significant” in a softening market.”

Several traders reported Thursday that they would be coming into the office Friday despite Nymex’s closure, but with no cash deals to be done, all expected it to be a short workday. An East Coast utility buyer said he would be allowed to leave at 11 a.m. EDT. Despite the anticipated lack of cash market activity, the buyer reported getting an e-mail from an online trading service saying it would be available Friday for trading physical gas for Tuesday-only flows. He questioned whether that would result in anything, saying any would-be participants would have few counterparties for something that could be accomplished on the following Monday anyway.

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