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Freezing Weather Sends Spot Prices Soaring

With winter finally living up to its cold-weather reputation in just about every nook and cranny of Canada and the U.S. except peninsular Florida, cash prices spiked at virtually all points Tuesday in response to skyrocketing heating load. Quite a few gains were in triple digits and several Northeast citygates posted increases of more than $3.

The Northeast also saw some $10-plus highs as Wednesday's low temperatures were expected to dip into the teens and single digits (and even subzero in a few instances) in the regional forecast. Although New England citygates (Algonquin and Tennessee Zone 6) chalked up larger gains of more than $4 and had higher daily averages, Transco Zone 6's New York City pool racked up Tuesday's top quote of $13.

Cash quotes also derived some support from Friday's 30.9-cent uptick in February futures and a return of industrial demand from the long holiday weekend.

The two Western Canada points of NOVA Inventory Transfer and Westcoast Station 2 brought up the rear of Tuesday's price ascent with upticks of a little more than C20 cents each. Otherwise, prices rose anywhere from about 35 cents to around $4.10. The Northeast had all of the biggest gains of around $1.80 or more, but the West had a larger number of points going up by $1-plus.

Heavy demand and maximum storage withdrawals induced El Paso to declare a Strained Operating Condition (see Transportation Notes). On the other hand, Transco sees enough weather moderation in its market area in the near future that it is relaxing some imbalance makeup restrictions Wednesday.

Although icy weather dominates the national outlook for Wednesday, it is having less impact in the Deep South, where highs are likely to reach the 40s and 50s, The Weather Channel said. And southern Florida will be downright balmy with mercury readings peaking in the 70s, the forecaster said. Far Southern California and southwest Arizona will be a little chillier than that but still relatively mild with highs in the 60s, it added.

It's definitely a lot colder now in northern market areas, a Texas-based marketer said, but temperatures in the Midwest weren't dropping as much as had been predicted. Also, price strength was limited somewhat by most buyers pulling gas out of storage as much as possible while this cold blast provides the opportunity to downsize account volumes, he said.

There's probably a good chance of further price increases on Wednesday, the marketer added, but any continued advance almost certainly will not be as large as Tuesday's gains. He said it looks like a warmer-colder-warmer-colder pattern is setting up over the next few days in northern market areas.

Assuming cash prices do rise again Wednesday, they will have to do so with considerably less screen support than before. February natural gas futures ignored another precipitous slide in Nymex's crude oil contract for February but could eke out only a meager gain of 3.7 cents Tuesday.

The National Weather Service (NWS) continues to see below normal temperatures in most of the U.S. next week. In its forecast for the Jan. 22-26 workweek, NWS expects above normal readings only in the eastern two-thirds of Montana and the western half of North Dakota. The agency predicted normal conditions surrounding that area through the western two-thirds of the Midwest, into southern Missouri and Kansas and stretching through Wyoming into western Montana and northern Idaho. NWS looks for below normal temperatures throughout the rest of the nation except in the southern half of the Florida peninsula, where it expects normal conditions.

Citigroup analyst Tim Evans estimated a 60-70 Bcf withdrawal in the upcoming storage report.

Drilling rigs searching for natural gas in the U.S. increased by 33 to 1,444 in the week ending Jan. 12, according to the Baker Hughes Rotary Rig Count (http://intelligencepress.com/features/bakerhughes/). Rigs seeking gas in the Gulf of Mexico dropped by one to 80, Baker Hughes said; it counted only one rig drilling for oil in the Gulf.

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