Heating load is waning a bit in some regions, but the cash market still managed to find enough weather-based demand — along with getting modest support from a prior-day increase of 5.4 cents by November futures — to post strong double-digit gains across the board Tuesday.

With only a couple of exceptions (the smallest ones tending to be in Western Canada and Northern California), increases saw fairly even geographic spreads in ranging from about 20 cents to the 65-area.

Cash traders will have considerably stronger screen guidance Wednesday after prompt-month futures spiked by 32.6 cents in what was attributed to short-covering by some (see related story).

Although at least one source didn’t think so, both cash and futures may have gotten an little extra boost from a slight pickup in Atlantic tropical activity. The National Hurricane Center (NHC) said a broad area of low pressure over the southwestern Caribbean Sea was producing cloudiness and thunderstorms Tuesday and had the potential for slow development as it drifts northward during the next few days. However, the agency accorded the system a low chance (less than 30%) of becoming a tropical cyclone in the succeeding 48 hours. Regardless, NHC added, heavy rains are possible over parts of Central America.

NHC also set low development odds for a group of “disorganized showers and thunderstorms” associated with a westward-moving tropical wave about 850 miles west of the southern Cape Verde Islands. “Upper-level winds are not favorable for development,” NHC said.

The Rockies and parts of Western Canada, where overnight lows are dipping into the 20s, constitute the only seriously cold market areas remaining, although sections of the Upper Plains and northwestern Midwest are still pretty chilly. The Northeast and much of the Midwest are beginning to peak in the relatively moderate 60s, while Eastern Canada isn’t much colder with Wednesday highs forecast to be in the 50s.

Most of the South is expected to reach the 70s Wednesday, although Florida will be warmer than that in the 80s. However, a new cold front will be taking regional temperatures lower as the weekend nears. Even the desert Southwest, where summer-like highs in the upper 90s were being felt late last week, has begun to cool off again, with Phoenix not expected to reach 90 Wednesday.

A new high-inventory OFO by PG&E (see Transportation Notes) had essentially no pricing impact, as numbers rose about 20 cents or so each at Malin and the PG&E citygate.

Indicative of the dwindling heating demand that developed late last week in the South as a cold front engulfed the region, Southern Natural Gas said Tuesday it was “too close to call” on whether it might implement a Type 6 OFO for long imbalances Thursday or Friday.

Dominion reported that current working gas inventory in its storage facilities is little changed from comparable times in the past two years. As of last Thursday 288 Bcf had been injected, Dominion said; levels were the same on Oct. 18, 2007 and at 282 Bcf on Oct. 16, 2008.

A Midcontinent producer professed to have been “baffled” by Tuesday’s strength in both the Nymex and cash markets, although he thought the substantive gains may have been related to new forecasts of a cold winter in the eastern U.S. There’s certainly not much weather-based load left, though, he said. He offered his “only idea” to explain the firmness: people are continuing to buy storage gas now for the arbitrage opportunities (by selling outer-month futures at higher prices). Contrary to some perceptions, there’s still a little bit of injection space left, he added.

The producer dismissed the new tropical developments as market boosters, saying there was no “storm hype” involved in Tuesday’s run-ups.

Traders don’t seem to be worried any more about a possible price collapse from record storage inventories, he continued, and the market has gotten back to price levels high enough that producers will no longer shut in gas voluntarily.

It may have seemed surprising, a western trader said, but the Northern California market can have higher prices even with an OFO scheduled, although she noted the PG&E citygate and Malin saw some of Tuesday’s smallest increases. It’s still cool in PG&E’s service area but a warming trend will be under way before the weekend, she said.

The National Weather Service (NWS) looks for below-normal temperatures across much of the eastern U.S. during the Oct. 26-30 workweek. In its six- to 10-day forecast posted Tuesday afternoon, the agency predicted such conditions everywhere between lines running southward from the eastern edge of Montana through West Texas and from central New York to the eastern end of Florida’s Panhandle. NWS expects above-normal readings throughout California and in nearly all of Arizona along with the western sections of Nevada, Oregon and Washington state.

A strikingly large range of expectations is developing for the storage injection report to be made Thursday for the week ending Oct. 16. Stephen Smith of Stephen Smith Energy Associates said Tuesday his new estimate of a 6 Bcf build is down from a previous one of 10 Bcf. Citi Futures Perspective analyst Tim Evans is slightly lower in predicting an addition of 5 Bcf, although Evans said he expects a rebound to 40 Bcf and 30 Bcf in the weeks ending Oct. 23 and Oct. 30, respectively.

However, in a Tuesday morning note SunTrust Robinson Humphrey/the Gerdes Group said it “preliminarily” anticipates a 30-35 Bcf injection for the week ending Oct. 16, “less than half the injection reported the same week last year and nearly 30 Bcf below the long-term average. With paltry injections creating breathing room for U.S. natural gas storage, the probabilities of breaching physical capacity are becoming much slimmer even if we get remnant injections a week or two into November.”

SunTrust analyst Cameron Horwitz said he was aware of the significantly smaller expectations, but was “comfortable” with the company’s preliminary estimate centered around the low 30s Bcf, noting how much lower that volume was than historic comparisons. Of course, Horwitz said, he will run his models again before making the final SunTrust estimate Wednesday. He said he understood that Bentek Energy (which also does not publish its storage estimate until the day preceding the report) supposedly was in the upper 20s Bcf in its preliminary projection.

©Copyright 2009Intelligence 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.