Much like the week started, mostly flat numbers with a mild tendency to the upside were predominant in most market areas Wednesday. No longer constrained on injections by a partial-day outage of Questar’s Clay Basin storage facility (see Daily GPI, April 14), Rockies/San Juan pricing rebounded from Tuesday’s weakness but in most cases failed to regain as much as it had lost.

Sources doubt that the cash market will be able to keep treading water for much longer, with at least a couple expecting softness to set in Thursday at many points. Although pockets of chilly weather are still lingering in the Northeast and Pacific Northwest, the overall trend continues to be toward milder temperatures. But the chief reason for a bearish mood, the sources said, is that cash can’t keep ignoring the downturn in energy futures.

The natural gas screen fell nearly 8 cents Wednesday, creating a loss of about 15 cents over the last two days. But even more influential were the continuing plunges in crude oil and heating oil futures. The June crude contract (which supplanted May as the prompt month in that commodity Wednesday) followed up May’s dollar-plus dive on its expiry date Tuesday with another dollar-plus dive Wednesday, ending the day trading well under $27/bbl. Crude prices suffered from a report of a larger than expected buildup in U.S. inventories.

A strong hint of impending price declines came from traders reporting late retreats Wednesday in several markets. “Everything was going down along with the screen in late deals,” said a Midcontinent marketer quoting Panhandle Eastern in the low $5.20s early on but about a dime lower in her last transaction.

A Northeast trader reported similar trends. “There was a big gain in crude supplies, and oil futures weakness was spilling over into the gas market,” he said.

A Northeast utility buyer said there “nothing real abnormal” about regional high temperatures in the 50s, “but people fidget” when cold weather lasts this long into the spring. He said he was having no problem finding gas in the production area, but said supplies of delivered gas in the market area were “a little tighter than before.” He added that his company is “not going to get real aggressive on refilling storage for a while until prices come off further.”

A Midcontinent marketer was less complacent, saying, “I am a little worried about the state of storage. With prices so high, we haven’t been tucking much of anything away. I don’t want to think about what prices could look like next winter.”

In its forecast for next week (April 28-May 2), the National Weather Service predicts above normal temperatures for nearly all of the U.S. east of a line running from the western end of Texas through Wisconsin. The exception should be normal readings along the East Coast from South Carolina northward, NWS said. It sees below normal temperatures for the West Coast states and much of the Rockies, with a curvy band of normal conditions separating the above/below normal regions.

Western traders are trying to assess what the anticipated May 1 startup of Kern River’s expansion project will mean for bidweek prices. Several sources said they believe that Rockies prices in general will be a little stronger than usual while other points in the West may be a bit weaker in response. A marketer offering his analysis said all of the expansion capacity is firm, so IT shippers wouldn’t figure into the equation. Thus one would have to examine approximate demand charges of 36 cents from San Juan Basin via El Paso versus Kern River’s 63.5 cents under 10-year expansion contracts and 50.35 cents under 15-year contracts. That would seem to argue in favor of El Paso being the cheapest route to the California border, the marketer said.

But the commodity costs also must be compared. The San Juan-Blanco index of $3.63 for April was 37 cents higher than Kern River’s $3.26. But the spread is tightening considerably, the marketer said, because he is seeing May basis of minus $1.16 for Kern River-Opal against Blanco index of minus $1.10. All in all, he concluded, “it’s kind of shaping up as a toss-up” as to which pipe will be preferred for getting to the SoCal border.

Another western trader said he assumes that any gas that can get through Northwest’s Green River Compressor Station to Kern River during May will get a good price because of the expansion, but other domestic supply that can’t get through will be discounted significantly. He reported Sumas going for May at index plus 0.75-1 cent and Opal at index flat to plus 1 cent, but Northwest South of Green River is lagging at index minus 6-7 cents.

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