Quite a few points, mostly in the Midcontinent/Midwest and West regions, were moderately higher Wednesday, but except for a few other gains elsewhere, prices failed to see the price rally that some had expected to be generated by an impending bout of severe winter weather in northern market areas.

Most points were within about a nickel up or down from flat, but losses got as large as a little more than a dime while increases ranged to nearly 15 cents.

A few pipelines were announcing OFO-like actions or upcoming constraints on service in response to the advance of an arctic air mass southward from central Canada (see Transportation Notes). However, easing Pacific Northwest temperatures allowed Northwest to move in the other direction by telling shippers it would soon be lifting a Stage III entitlement that had been in place nearly a week.

Since the western segment of the Midwest and the Plains area was due to feel the brunt of the fresh bout of frigid weather first, and the West was recovering only slowly from an extended siege of cold that had dumped huge amounts of snow in some parts, it was natural that those markets saw most of Wednesday’s price strength. Conversely, the Northeast, where the arrival of the front would be delayed another day or two, and the South, where its impact would be less, tended to have most of the softening points.

A couple of sources agreed about hearing that forecasts for how severe the cold siege would be had moderated a bit. “Who knows when real cold will get here?” asked a Gulf Coast trader somewhat rhetorically, adding that weather analysts never seem to agree very often in his experience. He said he understood that some forecasts had been revised to indicate that the upcoming blast of winter in northern market areas would not be quite as harsh as what was expected at the beginning of this week. It’s a pretty quiet market for now since the heating load wasn’t building up as much as expected, he concluded.

A marketer in the Upper Midwest said snow was still on the ground in her city from a previous stint of freezing weather, but conditions were still rather moderate for mid-January as of Wednesday afternoon. However, temperatures were not expected to get out of the teens Friday, she said, and would remain below freezing through the weekend. She noted that “some warm air” was due to follow the cold next week, and that, along with predictions of less harsh weather than earlier expected, were limiting any cash bullishness.

A Houston-based source said storage withdrawal expectations also were weighing on prices. Although advance estimates cover a huge amount of ground (see futures story), they tended to average a little more than 100 Bcf, which would be a large comedown from the previously reported pull of 151 Bcf for the week ended Dec. 31.

Lehman Brothers analyst Thomas Driscoll was near the low end of predictions in estimating a withdrawal of 80 Bcf to be reported for the week ended Jan. 7. “Very warm weather (27% warmer than normal) last week is likely to lead to a disappointing storage withdrawal announcement on Thursday… The weather for the current week will not help as we expect another disappointing announcement next Friday (delayed one day due to the presidential inauguration). The weather is expected to turn colder next week and this could help — but it may be too late for the gas market,” he said.

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