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General Market Slumps, But New England Keeps Soaring

General Market Slumps, But New England Keeps Soaring

Even with the overall market making a sharp reversal Wednesday from the price spikes of the first two days of the week, New England citygates pushed to new highs as severe winter weather continued to intensify. The Algonquin citygate hit $12.00 at its high end in very volatile trading, while Iroquois Zone 2 and Tennessee Zone 6 peaked at $11.60 and $10, respectively.

Elsewhere, though, the market apparently had squeezed about as much upside as it could for the time being from the siege of freezing weather that has been around in the West for a while now but just struck the Midwest over the holiday weekend and subsequently spread into the Northeast. Losses ranged from about a quarter to nearly a dollar.

"We expect about a week longer" for major cold conditions to last, then moderating a bit before getting colder again, a Northeast utility buyer said. Essentially that means that much of January will be cold enough to keep generating heavy gas demand, she added. "We've seen some of our interruptible customers switching to alternative fuels" since the year began, the buyer observed. Of course, that was hardly surprising, since such a loss of market share for gas was being widely predicted in late 2003.

Algonquin did not issue an OFO, but told shippers it was "forecasting peak operating conditions across most of its system by gas day Thursday." The pipeline said it has "very limited operating flexibility and therefore requires all shippers and point operators to remain in balance on a daily basis." These restrictions are in place for Thursday: no due-shipper gas available anywhere on the system, and no incremental nominations flowing through the Stony Point station except for no-notice firm service or in accordance with North American Energy Standards Board guidelines and pipeline tariff priorities.

Wednesday's downturn had been partially signaled by reports of falling numbers in late trading at some points Tuesday. Also, temperatures were moderating a bit from Texas through the desert Southwest and into Southern California. And expectations of a relatively low storage withdrawal volume in Thursday's report, which would further increase the year-on-year inventory surplus, also contributed to trader bearishness, one source said.

People were backing off Wednesday from buying the quantities of gas they had wanted earlier this week, a western/Midcontinent marketer said. There was no clear trend on price direction during the trading session. She saw late numbers going down at Waha and on ANR-Southwest, but on the rise on Panhandle Eastern and at Malin. "Today was an odd day," the marketer said, adding that the variations in price trend could be chalked as just anomalies. But Malin's rise as deals proceeded was likely due to low PG&E linepack, she noted. The utility did not issue an OFO, but on its bulletin board it projected linepack as just above its minimum target levels over the next few days.

Southern Florida remained the nation's balmiest area, "but we're finally getting a little cooler," a utility buyer in the state said. An indicator of growing demand there was Florida Gas Transmission's notice that "current weather forecasts indicate that near-freezing temperatures will continue to be in the northern half of Florida today [Wednesday] and Thursday." It told customers in the market area to be aware "that FGT may issue an Overage Alert Day on one of the upcoming gas days to ensure that FGT's linepack does not drop to lower levels."

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