Bolstered by a futures gain of slightly more than a quarter but not much else other than expectations of more robust fundamentals, cash prices rebounded across the board Monday. Every point was up around 20 cents or more, with western increases tending to be much larger and hitting triple digits in California. Rockies numbers were on the high side of $2 again after having dipped below that level for the weekend.

Mainly prices followed the screen higher, said a utility buyer in the Northeast, “but some people may have been looking ahead to midweek when it’s supposed to hit 90 degrees in this area.” Monday’s rally means gas is getting uncompetitive with fuel oil again, he said, adding that last week when prices were falling gas had come “just short” of reaching parity with fuel oil pricing at the burnertip.

A marketer who trades the Northeast agreed that at least part of Monday’s price strength was based on anticipation of hotter temperatures on the East Coast later this week. Transco Zone 6 (NYC) was already trading around $4.23 Monday and Texas Eastern M-3 was only a few pennies behind, he said.

Although weather was getting hotter in the Midwest and in the aftermath of Tropical Storm Allison’s rains in the South, traders in both markets said the increase in cooling load was not substantial. “We saw only a marginal increase in UEG [utility electric generating] load” in the Midwest, probably because most of the power buyers already seemed long on gas supply, a marketer said.

Similarly, a Gulf Coast source said power generation buying wasn’t rising as much as the thermometer. There were doubts in some people’s minds about potential offshore production losses from last week’s storm, “but it wasn’t that big a deal,” he said. The storm came up so fast that “the weather guys were apologetic” about not providing more advance warning, he said, “but we didn’t lose any offshore gas.” Going into the month his company had been fairly pessimistic about swing prices, so he was pretty surprised to see Monday’s upticks.

California was measuring its gas price increases in dollars rather than cents even though the state’s power markets were somewhat languishing. Power was relatively cheaper than gas, said a trader who reported buying part of his supply from an in-state electric generator. PG&E had ended stringent high-linepack OFOs after Sunday, and a couple of sources agreed that despite alleviation measures announced late last week, the utility’s maintenance work was still cutting off a big amount of Baja Path supply. One went so far as to say look for a potential low-linepack OFO by PG&E later this week because the maintenance is causing a Baja reduction of more than 200 Mcf/d through the end of the month. “PG&E has not been able to make their maximum storage injection rate,” he added.

New flooding in Houston over the weekend wreaked havoc with the electric and communications systems in many downtown buildings. However, energy companies there said there were few problems Monday that hampered their trading activities. Dynegy, Coral and Enron reported all systems go. “Saturday was the worst day,” according to one marketer. “The pumps that pump water out of the underground garages have been getting a workout, but most buildings have parking and power. There are a few buildings that are reportedly without power still, but it doesn’t seem to be affecting the energy markets.”

Enron said three of its operated pipelines (Florida Gas Transmission, Northern Natural Gas and Transwestern) “experienced significant transactional systems outages for the gas days of June 9 and 10 due to emergency flooding conditions in the Houston area.” The flooding knocked out the scheduling server and disrupted normal customer notifications through outages of local and long-distance phone service, Enron said. However, it was able to process all nominations for Monday’s gas day.

ANR, an El Paso line, did not report any nominations problems but said its Help Desk line was out of service Monday due to the flooding.

Shooting from the hip, a Reuters news story Monday attributed last week’s tremendous decline in California gas prices to the May 31 expiration of the contract allotting 1.2 Bcf/d of El Paso capacity to affiliate El Paso Merchant Energy. El Paso was adamant that such a conclusion was untrue, which received support from a major trading competitor.

“All these numbers [falling California prices] were based on California’s peak power demand dropping by 11% in May compared to a year earlier,” said an El Paso spokeswoman. Gas prices were already declining seriously before the contract expired, she noted, and conservation measures have reduced electricity demand significantly.

A rival large trading company agreed that the California softening had nothing to do with the big chunk of capacity switching hands from a pipeline affiliate to about 30 other entities. “No physical [transportation] dynamic has changed, and it doesn’t matter whether we’re flowing the gas or EPME is, or someone else is,” said one of the company’s western traders. The fact that SoCalGas is in good shape on storage and that power has become relatively cheaper than gas also had a lot to do with last week’s declines, he added.

©Copyright 2001 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.