Continuing the recent run of erratic price swings from one day to the next, most cash points on Tuesday reversed course from Monday’s gains to record drops of up to 40 cents. Eastern and Gulf region points were down across the board while Midcontinent and western points were down with a few gains — mostly less than a dime — sprinkled in.

Tuesday’s action was a far cry from Monday’s deals, which showed eastern points gaining 30 to 60 cents with some Midcontinent and western points recording $1-plus additions (see Daily GPI, Oct. 21). Natural gas futures trading, along with the arrival of chilly temperatures, could help firm the market as the week progresses. After dropping 4.5 cents on Monday, November natural gas futures added 10.3 cents Tuesday to close at $6.844.

Citi Futures analyst Tim Evans said colder weather will certainly play a role in the current natural gas price action, but the burst of cold might be shorter-lived than first expected. “Updated weather forecasts now have the cold temperatures clearing the eastern U.S. by the 11- to 15-day period, although the bullish variances also look somewhat greater in the meantime,” he said. “This week looks a bit stronger with regard to heating demand and next week looks a bit weaker, but the overall demand may be about the same.”

Out West, traders were basking under much warmer conditions. “Things have been a little slow,” said a western trader. “In the Southwest, prices are starting to climb up. Earlier this month, we were seeing prices in the San Juan Basin around $1.50 to $1.83. Now we are looking closer to $4. I think it just shows that a lot of the constraint that was in play on the pipe has pulled off, so shippers who couldn’t give it away just a few short weeks ago are now asking for premium value. The rest of the West Coast is being held relative to that.”

The trader noted that the storage situation “looks good” and is of no real concern, especially as the West eyes some warmer temperatures. “We are looking at a warming trend from now and into early November, so heating load really is not expected to come into play in the near term.”

Looking at the remainder of the week, the trader said he thought prices would likely stay mostly flat.

The influx of cold into the eastern half of the United States was causing some issues for shippers. Northern Natural Gas posted a system overrun limitation (SOL) Tuesday on its entire system for Wednesday due to colder forecasted temperatures. Daily delivery variance charges penalties are applicable to the bumped shipper’s quantity, the pipeline said. The SOL covers all market area zones for the Northern Natural Gas system, which supplies gas to Nebraska, South Dakota, Minnesota, Iowa, Wisconsin and Illinois.

According to AccuWeather.com, things are expected to get colder before any warm-up is seen. “Big changes await the Midwest and East next week,” said Justin Povick, a meteorologist with the firm. “A cold blast is coming that will feel more like the tail end of November than October. Cold air is building over central Canada. As the jet stream dips, this cold air will follow to the south and east. In addition to the cold, the first pronounced lake-effect snow may get going in the Great Lakes, with flurries from the Northeast to the Appalachians.”

In addition to the squirrelly weather, the cash market is also still dealing with slow-to-return Gulf of Mexico production shut-ins caused by hurricanes Gustav and Ike during the first week of September. According to a Minerals Management Service update on Tuesday, 10.4% of the normally 694 manned platforms in the Gulf are still evacuated. Operators’ reports also reveal that 36.7% of the Gulf’s estimated 7.4 Bcf/d in natural gas production is still shut in, while 38.6% of the 1.3 million b/d of oil production is still off-line.

If the industry is missing the shut-in production, it is not showing in the weekly natural gas storage reports. The industry has injected an unseasonably high amount of gas into underground storage over the last couple of weeks. Over the last three reports, the industry has seen injections of 87 Bcf, 88 Bcf and 79 Bcf, whereas the five-year average builds for those weeks are 72 Bcf, 69 Bcf and 63 Bcf, respectively.

Looking at Thursday morning’s natural gas storage report covering the week that ended Oct. 17, Evans said his early estimate is that the Energy Information Administration reports a build of 85 Bcf, which would be much larger than last year’s 60 Bcf injection for the week and a five-year average build of 62 Bcf.

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