Cash quotes continued to rise Wednesday in both swing deals fortoday and in what little bit of bidweek business remained to bedone. However, doubt was growing about how much longer theunprecedented recent price strength can be maintained after futuresreacted negatively to a storage report for the first time in morethan a month.
It’s really too close to call about how cash traders will viewthe screen returning to essentially unchanged after having beenabout 20 cents higher at one point, sources said. Nearly 15 centsof that fallback occurred after AGA said 56 Bcf had been injectedinto storage last week.
Although that figure further increased the year-on-year refilldeficit and thus would have seemed bullish, there were some whosetrade strategy was to sell off their futures length on any reportexceeding 40 Bcf, a Gulf Coast marketer said. “Obviously there wereenough of them to make a difference,” he added. Another sourcesuggested the trading psyche had become “enough is enough” andpeople were looking for any relief at all from super-high prices.But several traders concurred that the basic supply/demand equationand storage worries have changed little, so almost any significantfutures uptick this morning could hold cash numbers steady or evenallow them to rise a little more.
Regardless of what happens today, the initial June aftermarketbegan with a show of strength as swing prices surpassed those forthe last day of May and the baseload peaks hit late in bidweekactivity. One source who made his last Southern California borderpurchases Wednesday morning in the $4.70s said he was glad hedidn’t wait any longer after seeing EnronOnline offering a swingswap deal in the $4.80s. He wasn’t doing any swing deals himself”because we’re kind of nervous about the aftermarket and want towait and see what it does.”
A producer noted the need to inject into storage “is not passingthe prudence test right now for many players. People are finding itdifficult to do anything but sell $4-plus gas.” The rationale forutilities to do that is that they can show their state publicutility commissions that they’re selling gas at a nice profit aboveindex, he said.
It will be interesting to see what happens after next week’sstorage report, said another producer. He cited a report byPetroleum Industry Research Associates (PIRA) guessing a refillnumber of 50 Bcf, which would be well under the comparable year-agofigure of 99 Bcf.
The producer and a marketer both harkened back to 1996 asmarking an important shift in gas markets, and agreed that whatwe’re seeing in 2000 is even more profound. “We used to look at1996 as a year of great change, but it seems certain 2000 willreplace that as the most defining year,” according to the producer.People’s concern about storage is legitimate because there’s almostno fuel switching going on, he added.
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