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Northeast Plunges Top Overall Cash Softening

With modest warming trends approaching Thursday in the Northeast and much of the Midwest, prices fell at nearly all points Wednesday. In most cases the drops were considerably smaller than prior-day spikes in ranging from a little less than a nickel to about half a dollar. The Northeast also was giving up less price ground than it had gained on Tuesday, but regional citygates measured Wednesday's losses in triple digits.

All of the smaller declines of less than a dime occurred at western and Texas points, where heating load remained strongest. The Rockies are due to see little if any warming Thursday, and although Texas temperatures will be rising a few degrees, the state will be digging out from icy conditions caused by freezing rain that was still occurring Wednesday.

Intrastate Texas demand for gas heating and power generation limited the Houston Ship Channel, Katy and Waha to price dips of only a few pennies, while El Paso-Permian was essentially flat. El Paso was still under a Strained Operating Condition (SOC) because of low linepack and reduced the SOC's tolerance for negative imbalances from 10% to 5% Wednesday.

Kern River also was struggling with low linepack issues believed to be related to continuing wellhead freeze-offs (see Daily GPI, Jan. 16), although the pipeline did not take any OFO-like actions. Linepack had fallen by about 200,000 Dth over the past two days, the pipeline said Wednesday (see Transportation Notes).

On the other side of the western linepack coin, Westcoast, which last week was encouraging packing of its system with its imbalance tolerance range, has swung so far in the other direction that the range for Thursday has been set at zero pack/20% draft. That and cold weather in the Rockies likely had something to do with why Sumas, which traded $1.50 above Northwest-domestic as recently as Jan. 10, was priced at a discount of nearly 20 cents to the domestic product Wednesday.

While penalty moves against negative imbalances have been relatively few, nearly all pipes serving frigid market areas have asked in one way or another for shipper cooperation in closely matching receipts and deliveries.

The Northeast has certainly seen some pretty big price moves this week, both up and down, a marketer said in understatement. The region will be getting a little warmer Thursday (the New York City area is expected to rise from a low of 21 and a high of 31 Wednesday to 30 and 39, respectively) but will start cooling again during the weekend, he added.

The marketer said he didn't see a cash rally in the cards Thursday, especially after Wednesday's 40.4-cent plunge by February futures, but he said prices might rise in Friday's trading for a colder weekend. However, people are "definitely" starting to pull storage harder than before, which makes sense, he said. "I believe they'll continue" to use more storage gas while the cold lasts.

Ron Denhardt of Strategic Energy & Economic Research estimated a storage withdrawal of 88 Bcf for the week ending Jan. 12, which would be a little more than double the year-ago volume of 42 Bcf but short of the five-year average of 119 Bcf. Reuters said its survey of 18 industry sources found an average expectation of an 80 Bcf pull in the upcoming report. The range of estimates was 65-90 Bcf, the news service said.

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