Cash prices again defied robust prior-day futures support along with cold weather forecasts in Canada and across most of the northern half of the U.S. in plummeting at all points Friday. The pervading softness was linked to early-season storage withdrawals, fairly moderate weather in the southern U.S. and the decline of industrial demand that occurs during a weekend.

Several points in the West, primarily in the Rockies but also including San Juan Basin and the Southern California border, racked up losses of around a dollar or more amid overall drops ranging from about 30 cents to the $1.45 area.

An excess of supply exacerbated western price weakness as both PG&E and SoCalGas issued new high-linepack OFOs for Saturday (see Transportation Notes) only a day after allowing previous OFOs to lapse. The Rockies market, which had been averaging solidly above $5 on Thursday, slipped back to around $4 or a little higher in two cases (CIG and Cheyenne Hub) and to less than $4 at other points in the region. Besides the California OFOs, Rockies numbers also softened due to dwindling heating load, as Denver’s high of about 55 Friday was expected to rise to the 65-degree area Saturday.

Overnight lows in the 30s and low to mid 40s were predicted for Saturday from the Northeast through the Midwest and Upper Plains into the Pacific Northwest, so there was a significant amount of heating demand. But Friday’s large price drops indicated that many buyers preferred to dip into burgeoning storage accounts instead of procuring new supplies. They also may have wanted to create a little injection capacity that could come in handy the next time prices drop to what they consider suitable levels.

On the other hand, with most of the South topping out in the 70s over the weekend, that meant virtually no cooling load remaining and little in the way of heating demand to replace it.

Although the Monday cash market will lack positive prior-trading-day guidance from futures (December futures fell 21.9 cents Friday) there’s a good chance of prices rallying at many points due to a cold wave having settled into almost the entire eastern U.S. for the week. Also, though it’s not yet assured, Rockies quotes may get the benefit of having full capacity restored on Cheyenne Plains Gas Pipeline this week (see Daily GPI, Nov. 2).

The Weather 2000 consulting firm noted that November began on a fairly mild note for most of the nation, citing thermometer levels reaching 69 degrees in Boston and Philadelphia “and even 58 in Minneapolis. “But abruptly transitioning from August-like temperatures [two] weeks ago to classic November weather next week will act as a refreshing reminder that Autumn is finally upon us,” it continued. “Contrasted to the record-warm October we just completed and relative to the very mild Novembers of 2005-2006, this will garner weather headlines in the media.”

A utility buyer in the western Midwest said his company has not yet started drawing from its storage account in the Nicor service area. But although “we’re not among the ones contributing to it” (lowering prices by substituting storage for spot market purchases), he said he was sure that other people have already begun making withdrawals. Otherwise, there’s no way that spot prices could have been so weak Friday in the face of substantive northern heating load, he said, adding that his area would be dropping into the 30s Friday night.

However, not all of the Midwest will be frigid through the end of this week. The buyer said his utility’s service area was expected to experience only two days of “real cold” Saturday and Sunday, then start transitioning back to normal conditions Monday.

A Houston-based marketer had a slightly different take on the major price softness of late last week. He said he didn’t think heating load was getting all that heavy yet in northern market areas. And since virtually everyone has full storage, he continued, there’s almost no injection buying still going on, which would be a bearish influence on prices. He kind of doubted whether a net withdrawal will show up in the next storage report, but said he certainly doesn’t expect any more big builds.

The marketer said his company saw some Monday-only buying in California, adding that the weather there apparently will be turning more bullish after the PG&E/SoCalGas OFOs Saturday.

A western utility buyer said his company has no storage, but he agreed that storage use by others likely contributed to regional prices tanking Friday. El Paso needs to enlarge its Washington Ranch facility, he said, and then it wouldn’t need to issue so many Strained Operating Condition notices when linepack gets high. Weather was still pleasantly warm in the utility’s headquarters city, he said, but it had some heating load in the mountainous section of its service area.

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