Cash prices reversed course at most locations Tuesday, slipping anywhere from a few cents to more than 20 cents, except at a number of western points that posted 10- to 26-cent gains, including Northwest Pipeline, Opal, CIG and Kern River, which reported low linepack. Trading ranges were extremely tight, coming in at 5-10 cents in many markets.

It was unclear whether the western price increases were prompted by Questar Corp.’s announcement Tuesday that as of Oct. 1 it was shutting in 32 MMcf/d of its Rocky Mountain region production (70 MMcf/d gross). On a net basis Questar said the shut-in volume equals about 1 Bcfe or 2.3 Bcfe gross for the month of October (see related story).

“The Rockies were up pretty strong today. Questar’s announcement came out after the market closed, but Questar may not be alone,” noted a regional producer. “It could be part of the reason prices have been rising here the last two days.”

Questar’s announcement follows a similar move last week by Midcontinent producer Chesapeake Energy (see Daily GPI, Sept. 28). Chesapeake said it shut in 100 MMcf/d of production (125-150 MMcf/d gross) for October and perhaps longer.

While a number of Rockies locations were stronger Tuesday, prices in the Pacific Northwest were flat to down a nickel or so. Stanfield was in the high $3.60s, down about 8 cents, while Opal was nudging up against it. “What was flowing on Northwest has pretty much evaporated,” said a regional marketer. “Opal was in the mid $3.60s, up more than a dime. We’re seeing weakness in Canada but some points in the western U.S. are still holding pretty strong.

“People have been trying to determine where gas will need to go this month so it’s still a mixed bag. One surprise has been the strong demand in California. SoCal must have some storage space left after gas came out to handle cooling load late in the season. I think as long as there is not an operational flow order, people are just going to be cramming gas into storage. Spreads to the winter months are still very attractive. But I also think that real heating demand is still very much lacking in this market with temperatures being so mild.”

California gas demand has been relatively strong for a while now but showed signs of weakness on Tuesday as prices at Malin, PG&E Citygate and Southern Border, PG&E, all fell sharply. Looking at gas flows at Malin, numbers have been running about 35-55% higher this year compared to the same time last year, according to data from Bentek Energy (see https://intelligencepress.com/features/bentek/). Gas flows at PG&E Citygate and Southern California Gas have been running about 25% higher than last year.

In addition to storage buying, part of the reason also has to do with power demand. Jeff Richter at Bentek noted that a large amount of power has been moving into British Columbia. “The forward curve tells BC Hydro to buy the power in the cash and sell the forward, and since they have the hydro storage capacity, it makes sense” to bring in power from the U.S. market. Another factor, he said, has to do with the time of the year. Temperatures in the Pacific Northwest have been above normal over the last few weeks and the hydro season is nearing an end. As a result, “off-peak power has moved into the gas stack with the marginal heat rate being around 9500. Gas is being burned on a 24-hour basis rather than the peak hours. Last year at this time, that was not the case.”

Bentek’s U.S. Power — Gas Burn Report showed gas demand for power generation nationwide up about 2 Bcf to 24.1 Bcf on Tuesday compared to 22.1 Bcf on Monday, but those numbers should decline through the rest of the week with cooler temperatures.

Bentek said last week’s generation gas burn looks comparable to the previous week, indicating that the weekly gas storage report on Thursday could show a similar injection. Last week’s EIA storage report revealed a 77 Bcf injection. Ron Denhardt of Strategic Energy and Economic Research said he’s predicting another 77 Bcf injection this week compared to an injection of 45 Bcf during the same week last year and a five-year average of 66 Bcf. Denhardt predicts that working gas levels in storage will exceed 3.5 Tcf at the end of the season probably forcing other producers besides Questar and Chesapeake to shut in production.

Temperatures were much above normal Monday and Tuesday in the Midcontinent with actual highs in the 90s in many locations. Records were expected in Kansas and Missouri on Tuesday, and temperatures were expected to remain higher there possibly through the weekend. Elsewhere, however, some cooler weather is expected.

Stormy weather was seen in the Midwest Monday and Tuesday. Midcontinent gas prices were pretty flat. Chicago was down a penny or two.

In the Southeast, temperatures were expected to be in the 80s. Florida Gas Transmission maintained an overage alert with a 25% tolerance due to 90-degree heat in its market area. The pipeline also said that a third-party contractor may have damaged its Texas mainline requiring one to three days of repairs that will take about 300,000 Dth/d of gas off the market. FGT Citygate was one of the only eastern points to show a price increase Tuesday, rising about 7 cents to near $5.

Florida is another location that has seen significantly higher gas flows this year compared to last. According to Bentek’s data, gas flows into FGT’s market area have been running 15-29% higher recently than flows during the same period last year. About 4.59 Bcf/d was scheduled for Tuesday’s gas day compared to 3.56 Bcf/d on average last October. “Florida has just been high all summer,” said Bentek’s Jim Simpson, vice president of operations. “Some speculation is that coal is either hard to acquire because of railway delivery issues or they are stock piling it… It could be just a natural upward shift in demand as well.” With oil prices less attractive than gas for power generation this summer, Florida utilities undoubtedly were burning more gas this year than they were last year.

A cold front, however, is expected to slide through parts of the Southeast later this week, allowing for a cool-down across the area. Highs are expected to be in the 70s for the Northeast. But highs in Upstate New York and Northern New England will remain in the 60s. While the overall mild conditions will continue for most Northeastern areas on Wednesday, a sharp drop off in temperatures — by 10 to 20 degrees — will be felt once a front passes through by Thursday, Weather.com said.

A cold trough also is expected to settle over the West over the next couple of days, bringing scattered showers and overall cooler temperatures. In fact, a winter storm watch is in effect for the California Sierra Nevadas late Wednesday into Thursday. High temperatures will be running 10 to 15 degrees cooler than average across much of California for the next couple of days, with 60s across most areas and 70s in the interior valleys. The West as a whole will be seeing cooler readings over the next several days.

©Copyright 2006Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.