Some cracks formed Thursday in the wall of firmness that the cash market had established the day before, but for the most part severe cold blanketing Canada and nearly all of the Lower 48 states kept a large majority of points rising. A 20-cents-plus screen gain on Wednesday added a bit of extra support to Thursday's heating load price strength.
Even if a highly unlikely weekend warm-up were to show up in the forecast, Friday quotes could still be expected to be strong after January natural gas futures skyrocketed by $1.294 Thursday, setting prompt-month records for intraday ($15.100) and daily settlement ($14.994). Despite what was considered a slightly bearish storage report, Nymex traders focused instead on the siege of arctic cold engulfing most of North America with the official start of winter still nearly two weeks away (see futures story). The exchange's petroleum product offerings also made big jumps.
Cash increases ranged from a couple of pennies to about 90 cents. Most western points realized strong advances as low linepack issues and related OFO constraints proliferated in the region (see Transportation Notes). On the other hand, a few instances of flatness joined declines that ran as large as about 70 cents. The very thinly traded NGPL Iowa-Illinois point fell a little more than a dollar.
The Energy Information Administration reported a storage withdrawal of 59 Bcf for the week ending Dec. 2. The volume was within the range of expectations but a bit less than consensus estimations in the 60s Bcf.
Frigid weather was still the name of the gas price game, as bitterly cold conditions reigned almost everywhere Thursday. A Calgary-based source, however, did say some moderation was on the way there, with highs near 50 degrees F. due this weekend. And Houston, predicted to experience a light freeze Thursday night, could look forward to highs in the mid 60s Sunday and Monday.
Still, most markets are shivering and will continue to do so for a while longer. As the Weather 2000 consulting firm noted in an advisory, 54% of the contiguous U.S. had snow cover, and 29 states got to zero degrees or less Thursday morning.
Western markets had to grapple with numerous low-linepack problems (see Transportation Notes). El Paso and Northwest were in the process of strengthening OFO-like constraints and PG&E issued a customer-specific OFO for Friday (which the utility often expands to a systemwide OFO on the following day, as one trader pointed out). Meanwhile, Transwestern, Kern River and Westcoast were among pipes declaring that linepack levels were excessively low. As if that weren't enough, Northwest suffered a rupture south of its Green River Station in Wyoming.
On the other side of the OFO coin, Northern Natural Gas is ending a System Overrun Limitation that had been in effect since Sunday. But an NNG spokesman in Omaha said 6-7 inches of snow was on the ground there with more coming over the weekend.
Producers in the Gulf Coast and Midcontinent/Midwest said they were unaware of any wellhead freeze-offs occurring in the low temperatures. The linepack issues in the West raised the suspicion of freeze-offs being a cause. A Calgary-based producer said it was possible that there might have been a few freeze-offs "here and there" in the Rockies, but nothing significant enough to register on the gas market radar.
Sumas and Malin should be very strong Friday as a result of Northwest's line rupture and stricter OFO conditions, the producer continued. He noted that the sustained severe cold in the Pacific Northwest had Westcoast's Station 2 trading stronger than NIT (NOVA Inventory Transfer), which he said is unusual.
Obviously the screen was big news Thursday, said a Midcontinent producer. He expects firmer cash numbers Friday, but thought cash would have a tough time keeping up with the dollar-plus spike in futures. He noted that the Chicago citygate was one of the infrequent softer points, saying he sold gas there at $13.95 Thursday, down 40 cents from his price the day before. Chicago had "sold off real hard" in the late going Wednesday, so it was pointing downward already, he said. Also, despite the Chicago area forecast to remain below freezing in the 20s Friday, that represented some moderation from Wednesday's low of zero.
The producer observed that Midcontinent intra-month basis to Henry Hub had tightened up considerably since bidweek due to the much colder weather arriving. In first-of-month indexes, he said, Panhandle Eastern was a little more than $2.60 back of the Hub; on Thursday the spread was less than a dollar.
OFOs are likely to start popping up in the East after a few more days of the current cold blast, said a Gulf Coast producer. He explained that for now OFOs are concentrated in the West "because it's been very cold there for a longer time" than in the East. The New York City area already has about 5 inches of snow and should be getting more this weekend, he said.
The screen run-up started after the storage report, the producer said, but he didn't know what prompted the dollar-plus jump to more than $15 at one point. However, he had to guess that "with the entire country being cold," maybe some worries about storage inventories were starting to resurface in traders' minds. "Cash was not nearly as crazy as the screen was," he added, but definitely cash should be up strongly Friday.
The recovery of shut-in Gulf of Mexico supplies slowed again. Minerals Management Service said outages had dropped only 33.25 MMcf/d from the day before to 2,441.83 MMcf/d Thursday.
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