Cash numbers continued to rise at all points Wednesday, but the size of the increases was considerably less than on the day before. Small to sizeable retreats in the Midwest and South from heat levels that had been rising earlier in the week were cited as the key factor in slowing down the post-holiday rally.

Wednesday’s gains ranged from about a nickel to nearly a quarter, with most in the low to mid teens. The Northeast tended to have the greatest concentration of sub-dime quotes, while the most strength was shown by Waha/Permian Basin gas, which responded to an OFO by El Paso indicating a linepack shortfall (see Transportation Notes) and growing air conditioning load in the intrastate Texas market.

Western markets also derived support from an expanding area of triple-digit temperatures in the desert Southwest that extended into central California, along with highs around 90 or above in much of the Rockies.

Cool fronts were taking daily highs back down into the 60s and 70s in the Pacific Northwest, Upper Midwest and New England. Meanwhile the South, which had been recording 90-plus peaks Tuesday in many cities, found most areas slipping into the high 80s again Wednesday.

A utility buyer in the lower Midwest and a Northeast marketer both hesitated to hazard a prediction on the market’s direction Thursday. “I don’t know” because there are influences both ways, the utility buyer said. On one hand it was rainy and mild in his area Wednesday, but the forecast was for warming into the 90s by the weekend, he said. But a decline of 5.4 cents in natural futures, accompanied by moderate losses by the crude oil and heating oil contracts, might make it harder for cash gas to keep firming, he said. Also, “you don’t want to buy gas” until the weather actually makes you need it, the buyer added.

The marketer also saw the Thursday market as a toss-up. It got negative guidance from the screen Wednesday, and earlier-week increases in temperatures seem to have stalled for the time being, he noted. But there’s no doubt it has gotten hotter since last week, he added. It won’t happen until too late to affect any but the last few cash deals that day, but Thursday’s morning’s storage report, along with the American Petroleum Institute and Department of Energy oil inventory statistics (which were delayed from their usual Wednesday morning release by the holiday) should set the market tone into early next week, the marketer said.

Lehman Brothers analyst Thomas Driscoll said he expects a storage injection of 100 Bcf to be reported for the week ended July 2.

The National Weather Service (NWS) outlook for the July 12-16 workweek looks rather bullish for gas prices. The agency expects above normal temperatures in a huge area encompassing the Northeast, Midwest, Midcontinent and much of the Rockies, and that also dips into the midsection of the Southeast. Above normal levels are also predicted for the state of Washington and an area comprised of southern Nevada, western Arizona and eastern California. The only places where NWS looks for below normal temperatures are in Southern California and western Louisiana combined with most of East and South Texas.

The heat is on, proclaims the Weather 2000 consulting firm. “Anomalous May-June warmth (which was ignored or blown off by most) has now set the stage for even more intense warmth for most of [the] nation,” Weather 2000 continued in an advisory issued late Tuesday. “Even though July in the far West is more like the rest of the nation’s May, California locations such as Sacramento, San Francisco, San Diego and Los Angeles have already begun July 2004 on a warm note. And much more sizzling weather in the West is in store shortly…

“Hot, hazy, humid weather will blanket almost the entire central and eastern portions of the nation. Of small but significant note is that New York City has not had a below normal day all month and Newark has already reached into the 90s twice. Moist, oppressive warmth will remain the heat highlight headlines, as opposed to scorching afternoon temperatures, and the most notable warmth ‘shock’ will come to portions of the Midwest/Ohio Valley, which have mostly gotten off the hook this summer season to date. Relative cool will likely be relegated to the central and eastern Canadian provinces, and perhaps portions of interior New England [or] the northern Great Lakes, but not much to talk about in any event.”

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