Prices continued to fall Tuesday, although by lesser amountsthan on Monday in most cases. The majority of Tuesday’s dropsranged from about a nickel to a little more than a dime, withisolated points such as the PG&E and Algonquin citygatesfalling by slightly more than 15 cents.

A moderately softer screen contributed to the cash softness,sources said, but it was more the easing of hot-weatherfundamentals in the South and West (along with the Northeast andMidwest still not contributing much in the way of air conditioningload) that depressed the overall market.

As of press deadline Tuesday afternoon, the CaliforniaIndependent System Operator had not progressed beyond a Power Watchdeclaration (a plea for energy conservation) and Pacific Gas &Electric did not renew a low-inventory OFO for today. PG&Ecitygates started off at their high end in the $4.50s becausetraders were cautious about the possibility of another OFO, butquickly plunged into the high $4.20s after no order was posted, alarge aggegator said. The Southern California border saw evengreater volatility, but its average did not fall as far as thePG&E citygate’s.

In contrast to firming western basis numbers for August, thoseat eastern points were getting weaker, even with August futuresdown another nickel or so, traders said. A producer said CNG basisdropped from plus 18 to to plus 16.5-17 Tuesday, andColumbia-Appalachia (TCO) went from plus 15.5 to plus 13.5. He alsoreported Texas Eastern M-3 at plus 30, Transco Zone 6-New York Cityat plus 36, and Transco Zone 6-non NYC at plus 28. A marketerquoted Consumers Power and MichCon both at plus 7-8 and Chicago atplus 5.5.

Softening basis in the East also applied to the winter term(November-March) period, said another marketer. TCO winter basisdeals were done at plus 25-26 Monday, he said, but the offers weredown to plus 23 Tuesday. “A month ago TCO was trading as high asplus 40 for the winter,” he said.

Meanwhile, western basis kept getting stronger at several pointsTuesday, and a couple of sources said it was largely due to theWest having the lion’s share of severe hot weather for nearly amonth, while much of the East (with the exception of the South andparts of the Midcontinent) was enjoying relatively cooltemperatures for the middle of summer.

El Paso-Permian basis advanced to the unprecedented basis levelof plus 4-5, which surpassed even the Waha gain to plus 1.75-2.75,one marketer reported. One reason the Permian is so strong is thatonly so much San Juan Basin gas can reach the Southern Californiaborder, she noted. With plus 4-5 basis indicating August pricesaround $3.70 in the Permian, “you can still make money movingPermian gas to the border” at El Paso’s variable transport costs ofaround 50 cents (including fuel), the marketer said.

A popular electronic trading service was quoting border basisaveraging around plus 85 Tuesday, another trader commented, but hecould find “no physical market to speak of. Where is the demand tosupport that basis?”

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