A winter storm sweeping its way eastward into the central U.S. and Canada, along with prior-day support from the December futures contract's advance of 28 cents on Monday, were responsible for rising prices Tuesday at most points. Several instances of flat to a little more than a nickel lower, mostly in the Gulf Coast and Northeast, averted a clean sweep of gains.
The two points currently boasting the highest-priced gas in the continent are ones where supplies are normally relatively inexpensive. Sumas had quotes peaking at $9.80 as it skyrocketed nearly a dollar into the $9.60s Tuesday. And even with the discount for Canadian currency, Westcoast Station 2 soared another C80 cents or so to average in the mid C$9.20s.
A Calgary-based producer had a simple explanation for the unusual Station 2 price prowess: "It's damn cold" in British Columbia, he exclaimed (Vancouver, BC was forecast to see a low of 12 degrees F Tuesday). And the winter storm that recently passed through the Pacific Northwest has left high heating demand in that market area also, he said.
There also have been some wellhead freeze-offs in the province due to prolonged cold, he said. As a result, Westcoast's biggest three processing plants -- McMahon, Pine River and Fort Nelson -- are all flowing about 70% of normal volumes because of getting less field supply, he said. Vancouver has gotten 30-45 centimeters of snow within the last few days and it hasn't had a chance to melt, he added.
Westcoast acknowledged on its bulletin board that system linepack was "extremely low."
With the storm having reached just the central part of the U.S. and Canada, there's not that much demand yet from eastern markets, and thus NOVA Inventory Transfer (NIT) prices in Alberta are not as strong as those at Station 2, the producer continued. But although NIT quotes rose only about C14 cents, temperatures in Calgary were even colder than in Vancouver, falling to a low of minus 16 degrees Tuesday.
NIT bidweek numbers were up about C20 cents from the day before due mostly to screen strength, the producer said. December futures expired at $8.318, up 32 cents on the day.
Most of Tuesday's biggest gains occurred in the Midcontinent, where overnight lows were expected to sink into the low to mid 20s in Topeka, KS, and Oklahoma City. Cities in the Midwest market area would be warmer than that, but not for much longer as what The Weather Channel termed "a powerful cold front" will be arriving in the region Wednesday. Conditions in the South and Northeast will remain generally moderate for another day, but they will get their turn at facing winter's wrath around Thursday or Friday.
Meanwhile, much of the West continues to experience harsh winter conditions. Denver's low Wednesday is forecast at 5 degrees.
Convergence between Henry Hub and December futures didn't work very well, a utility buyer in the South remarked rhetorically. The Hub's gain of several cents into the low $7.60 left it about 70 cents behind December futures, he noted. His company hasn't been trading in the daily market lately because of mild weather, but that's about to change, he said. "It makes us look like geniuses" to have winter term contracts activating Dec. 1 just in time for the arrival of cold weather, the buyer said. However, the company might have to buy a little spot gas Wednesday because the front is due to arrive in his city Thursday evening.
The utility is sitting pretty for December, he said. There is plenty of gas in storage to use, and the company also has LNG storage tanks, he noted.
With a sea of blue on the National Weather Service's (NWS) six-to-10-day forecast map, it's easier to describe where the agency doesn't expect below normal temperatures during the Dec. 4-8 workweek than where it does. NWS looks for normal conditions in the southern half of the Florida peninsula; in an area encompassing Montana, the Dakotas, western Minnesota, northeast Wyoming and a northern slice of Nebraska; and in California along with the western halves of Nevada and Arizona. Only two small areas are likely to see above normal temperatures, NWS said: north-central Montana and along the California coast from around Los Angeles to near the Oregon border.
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