Rising air conditioning load across the South was insufficient to avert modest to sizeable price declines at nearly all points Wednesday. Flat Southern California border and Transwestern Permian numbers were the exception to declines ranging from about a nickel to about 30 cents in the rest of the market.

For one source, the screen’s firming example Monday for next-day cash was countermanded by Tuesday’s futures retreat of about 12 cents, which helped lead to Wednesday’s cash softness. If the pattern continues to hold, look for a modest rally in the physical market Thursday since June futures gained nearly a dime Wednesday, he said.

Between the temperature extremes of highs in the 80s and 90s from Texas through the Carolinas and snow still(!) falling in Western Canada, nearly all regions are enjoying cool but fairly comfortable weather. That made it virtually impossible to sustain Tuesday’s price firmness even one more day, a couple of traders said.

According to the National Weather Service, the outlook for next week (May 12-16) calls for above normal temperatures south and east of a line going generally westward from Virginia but eventually curving southward through northwest New Mexico and Arizona. It expects below normal readings throughout the Northeast, along the northern row of states and west of a line from Wyoming to Southern California. Normal conditions are predicted for the band between those two regions.

Noting that PG&E was projecting linepack in the vicinity of its minimum limit over the next couple of days, a marketer said there was “pretty good demand” on utility’s system despite Wednesday’s citygate decline of a little more than a dime. Temperatures are running 8-9 degrees below normal in Northern California, he said. Otherwise Wednesday was a “dead market” for him.

Snow was falling again in Calgary Wednesday and was expected to continue Thursday, a Canadian producer reported. However, temperatures were right around freezing, so it was “just barely cold enough for snow,” he added. And the frozen precipitation was melting almost as soon as it hit the ground, “so it’s not too bad,” he said. Next-day intra-Alberta quotes started the day down about a quarter around C$6.20 but gradually climbed about C20 cents higher, getting a little extra goose from a firm screen, the producer said.

A Texas producer commented that the gas price-boosting effect would be in his favor, but he was “a little worried” about what will happen if the 1,250 MW South Texas Project 1 nuclear unit stays offline into late summer, as some expect. His concern was justified, given all the publicity in recent months about declining production and record low storage levels arrayed against increasing power generation demand. According to a Dow Jones Newswire report Wednesday, analysts have estimated that 10 Bcf of gas-fired power would be needed each month this summer to replace the nuclear unit’s normal output. South Texas Project’s operators have said they expect Unit 1 will stay down until late summer, but the analysts think even that estimate may be optimistic since a decision on how to fix the boric acid-related leak problem has not been made yet, Dow Jones said.

Citigroup analyst Kyle Cooper said his final estimation for this week’s EIA report is for an injection in the 86-96 Bcf range, adding, “A build in excess of 100 Bcf is not considered completely out of the question if the same comparisons to the regression model hold true. However, last week’s report was considered extreme in relation to the models, even including our R&C [residential and commercial] theory, and a report closer in line with the models would leave the injection well below 90 Bcf. The Good Friday holiday may also have played some role in last week’s larger than expected build [57 Bcf]. Obviously our confidence is rather low.” Cooper noted that this week’s report will compare with injections of 39 Bcf a year ago and a five-year average of 58 Bcf.

He went on to note that crude oil “is considered extremely cheap in relation to natural gas on a $/MMBtu basis. Historically, crude commands an approximately 60% premium to natural gas. At today’s [Wednesday] close, it trades at approximately a 20% discount. We do not believe the current fundamentals in the two markets justify a return to that historical relationship. However, this differential to the historical average seems extreme to say the least.”

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