Other than a smaller than expected storage withdrawal report for a change, Friday’s cash market held no surprises. As sources had expected the day before, a screen decline of nearly 20 cents on Thursday, the normal demand drop of a weekend (especially coming between two major holidays) and forecasts of upcoming milder weather led to most points falling 15-35 cents or so. Transco Zone 6-NYC was conspicuous with a plunge of more than 60 cents.

According to the National Weather Service’s forecast, prices could be expected to keep falling as 2003 begins. NWS predicted that over the first five days of January, temperatures will be above normal for most of the northern half of the U.S. and normal elsewhere except for a patch of below normal readings in the south central section encompassing Louisiana, Oklahoma, Texas and New Mexico. In a slightly longer-range outlook for the Jan. 3-9 period, NWS expects much the same conditions except for below normal temperatures shifting to the Southeast from Texas through Georgia and Florida.

Besides the prospects of milder weather following a week in which several cities in the Northeast recorded daily record snowfalls for Christmas Day, prices got another moderately bearish signal Friday from the Energy Information Administration. In its holiday-delayed storage report, EIA said 95 Bcf had been withdrawn in the previous week. After a couple of reports that exceeded or were at the top of the range of prior expectations, the agency finally surprised some traders with a volume near the low end of estimates. The Nymex reaction was subdued, however, as futures rebounded after an initial dip and wound up the day nearly 3 cents higher. That relative show of strength possibly was due to comparisons with the year-ago draw of 80 Bcf, which meant the year-on-year deficit continued to mount.

A Northeast utility buyer had another suggestion about the screen firmness: “I think Nymex traders were looking past this report to the next one,” which will reflect withdrawals during the big Christmas week snowstorms. Although he saw weekend prices dropping in late deals Friday, he expects a modest rebound Monday, saying that despite forecasts of more moderate weather in early January, “we’ll still be pretty cold as the week begins.”

As might be expected when fundamental outlooks conflict, sources were mixed on where January-ending prices would go Monday. A marketer said he still considers the screen and cash numbers too high, “so I’m looking for more softness.”

Another Northeast utility buyer disagreed with his neighbor (above), saying the next few days were shaping up as relatively mild and that New Year’s Day temperatures might be in the 50s. “It’s still going to be cold next week, but not as bad as earlier this month,” he added. The buyer went on to say, “We’re in great shape storagewise, just where we wanted to be.” His company is set to avoid most new purchases in January and February if it’s cold and prices are rising; if it’s warm they will have gas to sell, and if falling prices make that a bad idea, “we’ll just keep our storage through next summer.”

One trader reported buying nearly nothing on MRT, saying he got cut by all his markets, which may have been related to the pipeline lifting a System Protection Warning (see Transportation Notes). “It’s definitely about time prices came off some,” he continued. “Temperatures should be cool the first week of January, which could give some support, but I think prices will still fall substantially.”

Although the PG&E citygate traded under the duress of a high-linepack OFO (see Transportation Notes), its loss of about 20 cents was in line with other California points (SoCalGas did not issue an OFO). However, a marketer who picked up a late package in the high $4.60s after an earlier purchase around $4.80 said the latter deal must have been affected by the OFO. He was a bit puzzled about why Kern River-Opal rose into the $3.00s after trading early in the $2.90s (contrary to most price trends elsewhere), saying Rockies temperatures would be going up into the 60s over the weekend in some locations.

A western marketer said that on Monday his company is expecting to trade swing gas for Tuesday only and then to trade for Jan. 1-2 flows on Tuesday. The reason it doesn’t work out for a three-day period like last week is that the market wasn’t bridging a month-to-month transition over Christmas, but will be this time, he explained. He added that of course, he wouldn’t be surprised if some people use Monday to do both Tuesday-only and Wednesday-Thursday deals in order to avoid coming into the office on New Year’s Eve.

Once again, New York City-based Weather 2000 begs to differ a bit with NWS (as it did Dec. 20 in accurately predicting the Christmas Nor’easter) . In an advisory Friday, Weather 2000 said: “Over the past two weeks we have been monitoring the Outgoing Longwave Radiation (OLR) over Canada, and have been particularly interested in its increasing trend, signifying an ideal environment for true polar air masses to evolve and intensify. It takes time for these extremely cold air masses to regenerate after being delivered into the U.S. (as they were earlier this month). Our research indicates that the source regions, tele-connections, delivery mechanisms and blocking patterns are slowly coming into place to deliver yet another polar mass patten for the central/eastern states sometime after New Year’s (likely during the first full week of 2003).” In other words, beware of more winter storms in the making.

In the sluggish January bidweek, one trader reported an Opal fixed price of $3.03. New basis quotes (all related to the last-day settlement of $4.988) included Texas Eastern (Tetco) East Louisiana at minus 7-6 cents; Tetco South Texas at minus 23 cents (“Stx” has been weak all month, the trader said); Transco Station 65 at plus 5.25 cents; Transco Station 30 at minus 28 cents; and Tennessee Zone 0 at minus 21.5 cents. Transco Station 65 has one of the production area’s rare positive basis quotes because it usually is at a premium to Henry Hub, the source reporting that quote said.

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