A continuation of intense heat in the Eastern U.S. lentfundamental support to gas markets in the region Friday, keepingcash prices flat to slightly higher or lower for the weekend.Again, though, it was a case of “not so” in the San Juan Basin,Rockies and California. Although east-of-California markets sawhigh temperatures approaching or surpassing 100 degrees, a dearthof demand from the Golden State and the unrealized threat of an OFOon El Paso caused gas to back up into the San Juan-Blanco pool,resulting in a steep dive of nearly 30 cents. One source, whopicked up an early Blanco package at $1.78, about a dime down fromThursday, paid only $1.59 near the end of trading.

“There is no demand in California,” a marketer commented.Temperatures were in the 80s in Fresno, he said, when they shouldbe getting closer to 110 at this time of year. He welcomed theplunge in incremental Blanco prices, however, since gas was tradingin the mid to high $1.80s there for July. His company has a planton El Paso, he explained, giving them the flexibility to banklate-June gas for a few days.

Los Angeles is not hot right now and until it gets that way,Rockies prices will remain depressed, said a trader who reported aNorthwest purchase in the mid $1.40s after earlier quotes had beenin the low $1.50s. The only thing keeping the Rockies market fromgetting much weaker is the strength of Alberta prices, he said;otherwise we would be seeing Rockies numbers closer to $1.

PG&E Gas Transmission-Northwest said late Friday an outageof Unit C at Station 7 was now expected to last through today,continuing constraints at Kingsgate and Station 7.

The recent chaos in the power trading market, where some peoplehave paid multiple thousands of dollars per megawatt hour in hourlydeals, has had little impact on gas prices. A gas trader felt maybethere would be a residual effect that would start showing up inhigher gas prices in the July aftermarket. But a Midwesternmarketer thinks we’ve already hit a ceiling in adding electricgeneration load. Gas ran up initially when it got hot, but there’sonly so many gas-fired peaking plants around, he said. Once all ofthem are running you can’t increase their gas usage any more, hesaid, “and I think we’re at that point.”

Although many electric utilities, especially in the Midwest,were still pleading Friday for customers to conserve energy, thesituation appeared to be easing. Daily and hourly electric priceswere still much higher than normal but subsiding, one trader said.And after issuing a Power Watch in the morning, ISO New England(transmission operator for area electrics) canceled it in theafternoon, saying the situation had eased.

A producer said it appeared July prices were moving a littlehigher Friday, “but that doesn’t do any good if there’s no one tobuy it.” He thinks the buyer-seller standoff will come down to acase of “who is going to blink first.” And although some Julybusiness was proceeding, other sources agreed there’s still a lotof July market to get settled today and tomorrow. LDCs are waitingto buy while marketing companies are filling in a few gaps here andthere, but they really haven’t started buying yet either, accordingto a Houston source.

A marketer also had the impression that utilities were eschewingpurchases until after the weekend, and to him that translated intohigher prices this week.

One source placed the PG&E citygate basis at SoCal borderplus 5-7, saying that was down from a wider basis earlier in theweek. But another trader pegged the basis at plus 3, saying it hadbeen plus 7 and plus 11 earlier. She reported a citygate deal atjust under $2.30, saying the bid-ask spread was $2.29-31 Friday.Other fixed-price quotes included Northwest and Kern River in the$1.60 area, Malin around $1.80 and SoCal border in the low $2.20s.Sources reported hearing Chicago in the low $2.40s and both HenryHub and Transco Station 65 in the high $2.30s.

Despite plummeting late-June numbers for San Juan-Blanco, amarketer said if you can make it past the typically low-demand JulyFourth weekend, the upside potential from Blanco at $1.86 is fargreater than the downside.

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