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Slight Warm-Up Does Wonders; Nearly All Points Fall; NY Dumps $24

Despite continuing extreme cold in the Northeast, spot prices sharply reversed course Tuesday with Transco Zone 6 New York dumping more than $24 to end the day with an average slightly less than $16. Other Northeast locations were off $2-$5.75 into the $9-12 range.

Temperatures will continue to run well below February averages in the Northeast on Wednesday with highs in the teens and 20s north of the Mason-Dixon Line (and in West Virginia), the 30s and 40s in Virginia, eastern Maryland and Delaware. Heavy lake-effect snows were seen in western New York and Ontario with reports of as much as three feet in 24 hours. Heavy snow was expected Tuesday night and into Wednesday across the Ohio Valley into parts of the Middle Atlantic.

Across most of the rest of the country, prices were down between 20 cents and $2 in response to slightly warmer temperatures. Much-above-normal readings were felt in the Midcontinent and parts of the Rockies.

"Those people with transportation are making money like bandits. There is some IT, but it gets gobbled up pretty quickly," said a Midcontinent trader who reported selling gas for less than $7 in Oklahoma where temperatures were in the 60s Tuesday. Meanwhile, prices in Chicago fell more than $1.40 to slightly less than $8.

The market was behaving "a little more rationally today," said Rusty Braziel of Denver-based consulting firm Bentek Energy. He noted that a big part of the reason for recent unusual price spreads has been full utilization of existing transportation capacity from producing areas to market areas and heavy reliance on gas from storage. Capacity remained at near full utilization to the Northeast and to Chicago from Alberta, the Southwest and the Gulf Coast on Tuesday. Midwestern Gas Transmission from Chicago to the East/Gulf Coast also was still running full. However, flows on a number of other pipes were starting to decline with a slight warm-up in temperatures.

With eastern prices skyrocketing in reaction to below normal temperatures, storage operators have been using this as an opportunity to bring down high working gas levels. Bentek Energy speculated that Columbia Gas and Dominion have been forcing storage customers to keep to a tight schedule for withdrawals so that spring and summer operational problems can be avoided. Storage levels remain well above the five-year average.

"We understand that [Dominion] and [Columbia] may have had operational problems last year with storage customers leaving gas in the ground, and that these two large facilities may be insisting that customers not repeat that scenario this year," Bentek said in a report to clients.

Larger withdrawal requirements on Columbia Gas might explain why prices at Columbia Appalachia fell 50 cents Monday when all the other Northeast points were soaring $4 and $5. TCo prices were an anomaly in Tuesday's market. TCo moved up in contrast to every other point in not only the Northeast, but also the entire rest of the country.

Tennessee Gas declared a force majeure event Tuesday due to an equipment failure at the 7.6 Bcf Colden storage field, which is operated by National Fuel in Erie County, NY. The field, which provides about 115 MMcf/d of deliverability, was shut in Monday to remove debris that passed through filters and separators and then entered dehydration facilities, Tennessee said. The pipeline is investigating the extent of the damage.

Tennessee's 500 Leg experience some of the biggest price declines among Gulf Coast pipes Tuesday, falling more than $2. Southern Natural fell by a similar amount. Tennessee Zone 6 in New England fell $4.85 to about $11.50. Algonquin dropped more than $5 to slightly less than $12 and Iroquois Zone 2 fell a similar amount to average in the $12.70s.

Some of the larger temperature changes Tuesday were seen in the Midcontinent. Temperatures in Texas and Oklahoma were well above average, and the warmth was expected to spread across much of the South on Wednesday before cooler temperatures return Thursday and Friday. Denver was in the high 50s. Temperatures also were inching higher across most of the rest of the country compared to temperatures on Monday.

However, the latest mid-term forecasts indicate that the cold could be around through most of the month. The latest six to 10-day and eight- to 14-day forecasts from the National Weather Service show below-normal reading across the bulk of the nation. Above-normal temperature readings have been removed entirely from the map of the Lower 48 for the Feb. 12-20 time period.

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