Prices continued to rise at a large majority of eastern points Tuesday, but continuing hot weather in much of the West was unable to prevent softness on some pipes in that region. Gains defied a drop of 9.1 cents a day earlier by August futures and little in the way of major hot weather overall.

Single-digit gains dominated as most of the market was flat to a little more than a dime higher. Losses of 2-3 cents to about a dime were concentrated in the Rockies and Northern California.

The screen again set a negative example for the next-day gas market, dropping another 6.9 cents on the day before the August contract’s expiry (see related story).

Weather forecasts continued to appear largely unsupportive of cash market strength, even if it was just minor Tuesday. The Pacific Northwest will remain much hotter than usual Wednesday, and scorching mercury levels will remain in place from Texas through the desert Southwest. However, previous inland California highs in the low 100s will be retreating into the low 90s, and the Rockies have grown downright cool (Wyoming locations were expected to peak in the mid 60s and bottom out in the 40s).

Meanwhile, fronts in the Midwest are forecast to produce rainy conditions that will limit more regional highs to around 80 or less. The Northeast has grown warmer since last week but is not expected to exceed the mid to upper 80s.

Even the South isn’t contributing its usual amount of air conditioning load for late July. East of 90s highs in Texas, virtually all of the region is expected to fall short of reaching 90 Wednesday, with many locations limited to the mid 80s.

With the traditional injection season not much more than half finished, Southern Natural Gas said its two storage facilities in Louisiana and Mississippi had reached 93% of working gas capacity as of last Thursday. The pipeline, which has a total capacity of 60.0 Bcf, said inventories were at 55.5 Bcf on July 23. That compares with 42.3 Bcf (70%) on July 24, 2008 and 51.5 Bcf (86%) on July 26, 2007, it noted.

Kern River said Tuesday linepack had gotten low in the three farthest downstream of its four system segments. On the other hand, PG&E said it expects linepack on its California Gas Transmission system to be just below maximum target levels through Friday.

A Gulf Coast producer reported that he was busy with daily trading for Wednesday, but bidweek activity was light Tuesday. Because of generally weak weather-based load, he said he was “surprised” by Tuesday’s spot price strength, “but not really that surprised.”

He said he did only one August baseload deal Tuesday, and that was for Dominion South Point at index plus 0.25 cent. Bidweek numbers tended to be down a little bit from Monday because of the continuing Nymex softness, he said.

A marketer said it’s currently “about as warm as it’s been for a while” in the Northeast, so he didn’t find the continued price firmness Tuesday much of a mystery. He expected the Wednesday market to be “maybe a little weaker,” but mostly similar to Tuesday’s even after a second straight day of futures losses.

The marketer said he looks for the August Henry Hub index to be in the $3.40-60 range, “but it could squeeze a little higher.” Like the producer, he also reported a quiet bidweek so far, saying he had yet to do any “reportable” deals.

The National Weather Service predicts above-normal temperatures during the Aug. 3-7 workweek everywhere south of a line curving northeastward from southeastern Arizona into central Kansas before extending along the northern edge of Arkansas through central Tennessee and North Carolina. It also looks for above-normal readings in Washington state and a strip along the northern border of Oregon. Below-normal conditions are expected in the Northeast and Midwest, along with the northern two-thirds of California and a section of northwestern Nevada.

Tim Evans of Citi Futures Perspective said he expects declining storage additions of 70 Bcf, 60 Bcf and 58 Bcf to be reported for the weeks ending July 24, July 31 and Aug. 7, respectively. The weather outlook continues to favor natural gas bears, he noted. Stephen Smith of Stephen Smith Energy Associates is projecting a 72 Bcf injection for the week ending July 24, which he said is down from an earlier estimate of 74 Bcf.

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