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Plunge in NYC Prices Joins Overall Softening

Thursday's 51.6-cent futures slide and the weekend loss of industrial load were able to trump frigid weather either continuing or being reestablished over the weekend as the prevailing influences on Friday's cash market. The result was flat to lower prices at a large majority of points.

Transco Zone 6-New York City, which had defied general softness the day before with another spike to average nearly $25, was coming back to earth to some extent Friday with a plunge of nearly $12.60. However, that still left it the only price location averaging in quadruple digits as several other Northeast points recorded dollar-plus dives, although the Algonquin citygate was only about a nickel shy of a $10 average.

Not counting Zone 6-NYC, the losses ranged as high as about $3.40, although most were considerably smaller than that. Several scattered points, primarily in the Midcontinent/Midwest where weekend lows would be in the teens in many locations, saw gains of up to about 15 cents.

Actually, Friday was expected to be the coldest day of the current blast of cold for the Northeast, with a moderate rebound in temperatures during the weekend that would still leave freezing conditions in place. A new cold front was forecast to be moving into the region Sunday. Other cold fronts were due in the Midwest Saturday and to some extent in parts of the South and West.

OFO-like transportation constraints had died out last week, but Florida Gas Transmission and CenterPoint were initiating new ones Friday and Saturday, respectively (see Transportation Notes). Florida Gas Zone 3 was among Friday's minority gainers with an advance of nearly a dime, while CenterPoint-East was flat.

Bentek Energy of Golden, CO said Friday its Daily Supply/Demand Balance report indicates a significant drop recently in North American production (see related story). Total output fell 5% in one week, going from 51 Bcf on Jan. 10 to 48.3 Bcf on Jan. 17, Bentek said. Its canvass of market players found several influences behind the drop, including: wellhead freeze-offs, particularly in the Rockies; seasonal operating constraints, both from unusually large snowfalls and environmental constraints on producing activity around this time each year; and maintenance. "The Gulf region started to decline a few days before cold weather set in due to maintenance and operational curtailments on several pipeline systems," Bentek said.

Citigroup analyst Tim Evans had this comment about New York City's run-up to $30 last week: "Of course, this really shows that the New York area is desperately in need of more pipeline capacity, more storage capacity and/or an LNG terminal, but that's not happening so fast."

It's staying cold in the Northeast, a marketer said, but he thought Friday's big losses there were at least partly due to the regional market "starting to find a little flexibility" that it didn't perceive earlier. Also, Northeast citygates might have overextended themselves in their midweek show of hyper-strength, he said. Because of very cold weather returning and apparently intending to stick around for another couple of weeks, he said he "wouldn't be surprised to see pretty robust prices [this] week."

The marketer said he was hearing February basis for Tennessee Zone 6 at plus $2.80 Friday, although he didn't do any deals at the point himself. A lot of next-month deals went through early last week before the most severe cold arrived, he said. However, he expects that Monday will be very active for bidweek deals since traders will have the February futures expiration that day along with fresh weather forecast data for guidance.

Unlike some other locales where very cold weather has tended to wax and wane, a utility buyer in the South said it has been a "very steady cold in our area" over the last week or so. That has been advantageous in giving the company an opportunity to reduce its storage accounts by making economic decisions instead of just operational ones on whether to withdraw or not, he said. Like a couple of utility buyers previously, he said his company will roll over winter term deals and use storage gas during February, and doesn't plant to buy any new baseload.

Below-normal temperatures will continue into the Feb. 3-4 weekend for approximately the eastern two-thirds of the U.S., according to the six- to 10-day forecast posted Thursday by the National Weather Service. It expects such conditions during the Jan. 31-Feb. 4 period everywhere east of a line slashing southwestward across North Dakota from the state's northeast corner, then turning south along the western borders of South Dakota and Nebraska into eastern Colorado before curving southwestward again through central New Mexico. Whereas the agency's earlier prediction for the Jan. 29-Feb. 2 workweek had no above-normal areas, NWS now expects above-normal temperatures to be showing up late in the week in Nevada and the northern half of California.

The number of drilling rigs searching for gas in the U.S. during the week ending Jan. 26 took a large drop of 26 to 1,440, according to the Baker Hughes Rotar Rig Count (http://intelligencepress.com/features/bakerhughes/).

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