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Northeast $1-Plus Gains Amid Continued Rally

With the cold regime that has settled into much of the U.S. and Canada appearing more and more set for an extended stay, cash prices continued to rise Tuesday. The advance was across the board for a second day and derived extra support from Monday's futures spike of 43.3 cents.

Several Northeast citygates were seeing dollar-plus spikes and had some quotes topping $10, as they did a week earlier, although Tuesday's averages continued to fall short of the quadruple-digit numbers recorded on Jan. 16. Overall, the latest gains ranged from about a nickel to $1.70. Outside the Northeast, upticks weren't all that impressive in being capped at around 35 cents.

This week's firmness may be running out of steam in the West, which tended to have Tuesday's smallest increases and the only ones of less than a dime. But eastern gains should continue Wednesday based on the Northeast getting even colder, highs limited to the 20s in the Midwest, and continuing futures support. The February natural gas contract tacked on another 27.8 cents amid a general energy futures explosion at Nymex that saw crude oil soar by more than $2/bbl after the government announced that it planned additions to the Strategic Petroleum Reserve.

A New York City-based consulting firm had a bullish intermediate-term forecast for the market. "Having kicked off only three weeks into official winter, polar and arctic air will continue to dominate most of the nation into February," said Weather 2000 in an advisory Tuesday. "[The] atmospheric pattern is so large that a vast majority of the nation is experiencing below normal January temperatures; occasional arctic air masses will bring frigid readings to certain regions, but the bigger story is [the] enormous quantity of states being impacted by polar air masses."

"Keep on going, baby!" was a Houston-based marketer's response when asked if he expected cash quotes to keep rising Wednesday. Referring to the relative inequity between the size of increases in the Midwest (where he trades) as opposed to the Northeast when both regions are similarly cold, he said it's the concentrated population of the Northeast that tends to fuel greater heating load.

The marketer said Chicago-area LDC Nicor, which has restricted citygate deliveries several times in recent months, " is wide open" currently, being able to use all the gas that can get delivered into its system for the time being. There are a few transportation restrictions in effect on the pipes, but nothing major, he said.

He remarked that he wouldn't doubt new forecasts that say the market's current cold spell probably will last into mid-February and maybe beyond. It's nice to see the market's recent volatility, he said, because "it lets us make a little money."

It might sound heretical to some, but a trading representative for some Gulf Coast independent producers said "we hope not" on the question of prices continuing to rise. "I don't think the market should be this strong" because it just isn't justifiable, he said. After all, it's the last full week of January "and it's supposed to be cold," he added, saying the market seemed to be overreacting to what is essentially normal weather. But he had to accept the situation, he said; because "this market can stay irrational longer than I can stay solvent."

The trader said he was seeing a mix of his company's customers among some who are actively taking gas out of storage while others leave it in the ground for now. He reported getting a lot of calls for supply at Waha Tuesday because of cold weather in Texas and the Midcontinent.

The National Weather Service (NWS) expects below normal temperatures for a large majority of the U.S. next week. In its forecast for the Jan. 29-Feb. 2 workweek, the agency sees no above normal readings and looks for normal conditions in two western areas: the desert Southwest states (Arizona, Utah, Nevada and California) and a strip along the Canadian border that dips part-way into Washington state, Idaho, Montana and northwestern South Dakota. Otherwise the rest of the nation will be below normal, predicts NWS, with the greatest deviation below seasonal temperatures occurring in the Midwest.

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