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Cash Slips Despite Midwest Cold Front, 7 Bcf Withdrawal

Cash prices slipped 5-30 cents on average outside the Rockies Thursday despite a substantial jump on the Nymex, a slightly larger than expected 7 Bcf net withdrawal from storage reported by the Energy Information Administration (EIA) and an expected cold front that will move into the Midwest on Friday. Rockies prices continued to rebound from extremely low levels earlier in the week.

It was hard for traders to ignore the above normal temperatures across most of the country Thursday. Some businesses also will be closed Friday in preparation for Veterans Day and that will serve to reduce demand somewhat. And while the cold front will drop temperatures in the Midwest and Midcontinent, temperatures across most of the rest of the country will remain above normal.

"Chicago was weaker than I would have expected today. One of the issues was the number of businesses being closed [Friday] because of Veterans Day [on Saturday]. Peoples in Chicago will be closed Friday so some traders got a little screwed up on ICE. If you have gas on and didn't sell it through Monday, it could be tough. Nominations have to be good through Monday. Some people were doing Friday-through-Monday deals at Peoples. Others won't be able to buy Peoples gas tomorrow so they will have to roll positions over.

"Meanwhile, Chicago is 70 degrees today, but tomorrow it will be 50 and tomorrow night they're expecting it to snow. Saturday the high there probably will be like 40 degrees. It makes planning a little challenging.

"The other thing is that Nicor has been cutting receipts today and until further notice. Alliance, Midwestern and NGPL receipts were limited so basically you have to have firm capacity going to those gates or face cuts. The cut gas was going to Nipsco today, so that citygate was getting pounded down. People are switching stuff all around and prices are depressed."

Chicago prices ranged between about $7.10 and $7.55 with an average in the mid $7.20s, down about 15 cents or so from Wednesday. MichCon and Consumers averaged around $7.50 so transport to those areas was in high demand.

However, at least one Michigan buyer said prices are still way too high for her. "The price keeps going up and up and up, and we said we're not buying it. We have no need to buy at this point. Storage is full. The price just doesn't make any good sense to us. It's not going to be that cold over the weekend and today we have one heck of a beautiful day, no coat necessary, the sun is shining and its mid 60s."

Detroit was expected to reach 67 degrees Thursday, 56 Friday and 45 Saturday with a low of 45 Saturday night and some wet snow expected.

The Northeast market Thursday remained weak. Prices sunk about 10-15 cents with averages ranging between $7.83 and $7.99. Dominion South was in the high $7.70s and TCo (Columbia Gas) was in the mid $7.50s. Meanwhile, Henry Hub in the Gulf slipped a few cents to about $7.35 despite a morning run-up on Nymex that pushed the near-month contract to $8.25, the highest level for a near-month contract since Aug. 2 with the September contract hit a high $8.545. December futures ended Thursday up 13.2 cents to $7.955.

"Temperatures were in the mid 60s across most of the Northeast so we didn't see any kind of run-up there at all," said a marketer. "It barely covered variable costs on Transco. Tetco was crushed down. Tennessee worked OK from Zone 0 and Zone 1, but it wasn't that great. Tetco fuel is huge, about 10-11%. Tennessee's fuel cost is more like 8%. It's tough to make things work right now. We were trying to get stuff out of Canada and bring it into New England, but Canada is cold and everything was pretty tight."

Most Rockies points continued to recover from the significantly depressed levels earlier in the week. Maintenance on Kern River and Northeast, warm temperatures and limited takeaway capacity pushed prices well below $2, but on Thursday CIG, Northwest and Opal were way above the $5 mark. All three points jumped about $2. San Juan prices were flat near $6.20, but SoCal border dropped more than a dime and PG&E Citygate fell more than a quarter. PG&E called a high-inventory systemwide operational flow order for Thursday and Friday. Thursday's OFO was a stage 2 with $1/Dth penalties for noncompliance and Friday's was a stage three with $5/Dth penalties.

The EIA reported that the East region withdrew a net 10 Bcf of gas last week while the West injected 1 Bcf and the Producing region injected 2 Bcf. National working gas levels fell 7 Bcf to 3,445 Bcf as of the morning of Friday Nov. 3. The ICAP storage options auction had predicted a 1 Bcf net withdrawal. The EIA said working gas levels as of Nov. 3 were 7.7% higher than the five year average and 7% above levels at the same time last year.

The next weekly storage report is likely to show a net injection. Consultant Stephen Smith said he's expecting a 12 Bcf injection in next week's report for the week ending this Friday because of 20% fewer than normal heating degree days this week. Citigroup futures analyst Tim Evans said, "With no threat of a withdrawal next week, we see short-term price strength as a selling opportunity."

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