A relatively bullish storage report (65 Bcf), rising futures prices, continued moderate heating demand and the shutdown of another unit at the Palo Verde nuclear station in Arizona all contributed to solid price increases across the board yesterday.

Western and Rockies prices stole the show, however. After being left behind so far this week, the western spot market came roaring back on Wednesday, with daily prices rising 25 cents at some Rockies points. SoCal Border quotes were up 15 cents or more and balance of the month swing swaps at multiple western points soaring to new heights.

Arizona Public Service (APS) announced that two units at the Palo Verde nuclear plant are going to be down for a month for unexpected maintenance on some of the reactor’s key components. Each of the three units at the nuclear plant has a capacity of about 1,300 MW. “That’s going to have to be all filled in with gas-fired generation,” said one western marketer.

“We are taking down Unit Two to make repairs to what we call control element assemblies; those are devices that hold in place the control rods for the reactor,” said APS spokesman Jim McDonald. “They need to be replaced. We found some cracking on them. As a result of inspections on Unit Three, which is in a refueling outage now, we are going to not only replace them on Unit Three, but also on Unit Two. Unit One is at full power.”

All points in the West were “considerably stronger than what we’ve seen so far this week,” said another western marketer. “I don’t think there’s much increased load, but there sure was more buying.” He said all the locations in the Rockies were up more than 30 cents at their peaks. West Texas and Midcontinent highs jumped 20 cents or so from Tuesday levels.

“Balance-of-the-month quotes at Waha were $2.05-07, which is a reflection that prices will remain pretty strong going forward,” said one Texas trader. “SoCal swing swaps for the balance of the month are in the mid-$2.20s from current prices around $2, which is real strong. Panhandle in the Midcontinent is $2.10-13 for the balance of the month. Permian is 2.00-05, and San Juan is 1.90-95, which is a large increase.”

Although prices were up in Texas, the increases there were among the smallest Wednesday. Most points were up 8 cents or so. “There’s not much in-state demand,” said the Texas trader. “The Ship Channel is trading flat with South Texas, so there’s really no intrastate transport economics; everything is going out of state to the Northeast or Midwest.”

Market area demand drove Louisiana Gulf Coast points up another dime to 15 cents. “With the spreads right now working toward the back end of the winter curve, the storage guys are still putting more in the ground,” a Gulf Coast marketer said. “There’s a 60-cent spread to the back end of the winter.” He said transportation issues on Tennessee and Florida Gas were affecting prices. Tennessee has seals on nominations on the 500 and 100 legs because of maintenance and construction work. “They aren’t letting anyone increase nominations,” he said. “There’s also some constraints on Florida Gas near the market end, which is propping the hub up.” FGT said warmer weather is leading to overdrafting on its system (see Transportation Notes). Strong demand in the Southeast also is driving up prices at Transco Station 65.

The price strength in the Midwest was difficult to explain, other than to say cash was just following the futures run-up, said a Chicago trader. “Weather is pretty benign right now,” he said. “After a chilly start to the week, we are expecting seasonal temperatures heading into the weekend, with only a slight cool-down Saturday and Sunday, before warming right back up next week.”

He said the run-up in futures prices is working to compress the November-March basis for Chicago by a half penny or so to 10.5 cents. “The feeling among most traders is that there is going to be plenty of gas this winter, and the basis is reflective of that. Historically, Chicago has a winter basis closer to 15 than to 10,” he said.

Appalachian prices started strong yesterday, but fell back toward the end of trading, posting gains of only nickel or so. “We saw people buying excessively large volumes early in the week for their burns because it was so cool in New England, and now they are beginning a warming trend,” said a producer. “There’s no more heating load, and people are just putting what’s left in the ground. I expect prices to be flat to weaker tomorrow. There’s just not a lot of market left.”

Consensus storage estimates were centered in the low-70s Bcf or about 7 Bcf higher than what the American Gas Association said total injections were last week. The market clearly is expecting storage to reach a full 3.2 Tcf before this winter, and several traders said they expect to see prices come off over the next week or two, as storage injection demand declines. ” I don’t think prices will sustain these levels. We are going to be at a comfortable level entering the heating season, a level that will easily meet the demands of the winter,” said one observer.

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