The Northeast remains unusually mild for mid-July, but warming trends in the Midwest and Rockies/Pacific Northwest allowed prices to find enough cooling load in other areas to rise at all points Tuesday. In doing so, the cash market defied a further drop of 11 cents by August futures a day earlier. The Rockies had most of the top increases as a substantial number of locations recorded double-digit advances.

In a rare occurrence in the last couple of weeks, Nymex traders provided prior-day support for Wednesday’s physical market by sending the prompt-month futures contract 16.6 cents higher Tuesday (see related story).

Addison Armstrong, director of market research for Tradition Energy, suggested that besides growing heat levels in some regions, an advance of 12.5 cents by August futures in overnight activity gave extra impetus to the growing cooling load experienced by cash gas Tuesday.

However, analysts for SunTrust Robinson Humphrey/the Gerdes Group said that although cooling loads should remain fairly heavy in the South-Central/Southwest U.S. regions amid temperatures of 100 degrees or more, “aggregate U.S. cooling demand is expected to be 7% lower than normal over the next seven days with particular weakness in the Northeast/North-Central markets. Gas market bulls should find some solace in LNG flows, however, as imports have dropped back below 1 Bcf/d over the past few days.”

Florida Gas Transmission (FGT) kept an Overage Alert Day (OAD) that it had issued Monday in effect through at least Tuesday. Unlike Monday, when FGT-related prices softened despite the OAD, FGT quotes rose Tuesday along with the rest of the market.

Evidence of near-full storage continues to mount. Southern Natural Gas said it had reached 53.7 Bcf of working gas in its two facilities as of July 9, or 89% of its total 60.0 Bcf capacity. That compares with 39.9 Bcf (66%) on July 10, 2008 and 49.5 Bcf (83%) on July 12, 2007, Southern said.

Northern Natural Gas indicated declining cooling load in the Upper Midwest. A bulletin board posting noting a normal system-weighted temperature of 73 degrees at this time of year projected averages of 70 Wednesday, 66 Thursday and 67 Friday.

IntercontinentalExchange (ICE) noted that Henry Hub volumes traded on its system greatly increased from 731,800 MMBtu Monday when prices fell a little more than a nickel to 927,300 MMBtu Tuesday. Henry Hub prices Tuesday were up a little more than a dime.

Heavy heat will continue Wednesday from Texas and Oklahoma through such Southern locations as Little Rock, AR, and Memphis, TN, but will remain rather subdued with highs on either side of 90 continuing in most of the eastern South. Although not extremely hot, peak temperatures were due to rise into the low to upper 80s in many sections of the Midwest and Pacific Northwest Wednesday, while remaining in the upper 80s in inland California.

“What else can it be” other than growing hot weather, a Gulf Coast trader asked rhetorically, while admitting she was still “real surprised” to see Tuesday’s higher prices. “I sure would think” that Tuesday’s Nymex rebound would keep the cash market rising Wednesday, but until it really starts heating up in the northern market areas, further increases are doubtful, she said.

The trader commented that it’s been a kind of weird summer so far: super-hot in the south-central U.S. but not so much in the eastern South, along with downright mild for the most part in the Northeast and only a few sporadic bursts of significant heat in the Midwest.

A marketer in the Upper Midwest also expressed surprise at Tuesday’s price strength, saying “pretty cool nights and daytime highs in the 70s” were still prevailing in her area. She said she expected that the next few storage injection numbers are going to reflect the lack of northern demand, and she couldn’t imagine why some analysts were looking for shrinking injections. Contrary to the Gulf Coast trader’s projection, the marketer said it “would shock me” to see Tuesday’s price gains continue.

In recent years the market has seen signs in which an early-fall price collapse looked likely but didn’t happen, the marketer noted. But she thinks the chances of such an occurrence are a lot higher this year due to the much-higher volumes in storage already and the demand destruction that has been caused by the global economic downturn.

Citi Futures Perspective analyst Tim Evans projected storage builds of 82 Bcf, 63 Bcf and 67 Bcf for the weeks ending July 10, July 17 and July 24, respectively. Stephen Smith of Stephen Smith Energy Associates said his outlook for the upcoming storage report now is a build of 90 Bcf, which is up slightly Smith’s previous estimate of 88 Bcf.

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