One day after traders saw unseasonable triple-digit temperatures combine with infrastructure constraints to drive SoCal Citygate to a record-high $12.57/MMBtu, cash prices in Southern California eased Tuesday, but ongoing supply constraints threaten more volatility for the region.

SoCal Citygate fell $4.93 to $7.64/MMBtu Tuesday, moderating somewhat after a record-setting $9/MMBtu day/day increase Monday.

"Monday's price of $12.57/MMBtu was an all-time record," said NGI markets analyst Nathan Harrison, who noted that since 2008 SoCal Citygate has averaged $3.65/MMBtu in next-day trading. "The closest it's been to this was when it hit $11.77 on Feb. 6, 2014. The spike was clearly weather-driven and provides a good example of the sensitivity of next-day natural gas prices to short-term power demands."

Regional power demand was expected to drop slightly from Tuesday's forecast peak of 38,986 MW, with Wednesday's peak demand expected to reach 36,842 MW, according to the California Independent System Operator (CAISO). In its outlook for the upcoming winter, CAISO said it plans to closely monitor natural gas infrastructure because of potential constraints, with the depleted operations at the state's largest underground gas storage facility at Aliso Canyon playing a role.

"The Aliso Canyon situation is a significant contributor to the current strain on SoCal's system," Genscape Inc. gas analyst Joseph Bernardi told NGI. "While the limited return of Aliso earlier this year does give SoCal some additional storage flexibility, it's still limited compared to its pre-leak status because" of a 24 Bcf inventory cap imposed by regulators versus prior maximum working storage of 86 Bcf.

"That's a difference of 62 Bcf, which is comparable to the 56 Bcf difference between the current system-wide inventory (66 Bcf) and the previous three-year average for this date before the Aliso leak (122 Bcf). In total -- considering Aliso and SoCal's other three storage facilities -- inventories are currently 54% of what had been normal before the leak."

Still, SoCal withdrawals for the month have been comparable to previous years. The largest withdrawal this month was 338 MMcf/d, larger than any day/day change that occurred for October 2012, Bernardi said.

"So far the concern has more to do with conserving their limited storage inventory for the rest of the winter than with a notable lack of single-day withdrawal capacity," he said. "However, with many of SoCal's import restrictions set to continue until at least the end of December and past-year average storage withdrawals increasing significantly into November and December, the daily withdrawal capacity has the potential to become much more of an issue mid-winter."

Besides the limited operations at Aliso, one of the precursors to Monday's volatility in Southern California was a pipeline explosion in the western Mojave Desert that cut roughly 600 MMcf/d of import capacity through Southern California Gas Co.'s (SoCal Gas) interconnect with Transwestern at Needles, CA, since the start of the month, according to Genscape.

The unplanned outage coincided with planned maintenance on the Pacific Gas and Electric Co. (PG&E) system restricting Baja Path flows Monday from El Paso Natural Gas Pipeline at Topock, AZ, along with restrictions on power import capacity resulting from transmission maintenance, Genscape said.

The disruption at Needles is one of several restrictions that "have cut SoCal's operational capacity to import by 2,075 MMcf/d," Bernardi said. "SoCal accommodated for the lost Transwestern-Needles gas via increases at Kern-Kramer Junction, El Paso-Ehrenberg and Transportada de Gas Natural-Otay Mesa," which exceeded their monthly averages by 308 MMcf/d, 252 MMcf/d and 101 MMcf/d, respectively.

Imports at Otay Mesa have been increasing over the past week, Bernardi said, going from zero to the 101 MMcf/d posted yesterday, a five-month high, while Tuesday's "receipt of 164 MMcf/d is the highest in nearly six years.”

Meanwhile, surrounding points have seen uplift amid the demand and restrictions affecting Southern California. Bernardi pointed to rising day-ahead prices at points like Opal and Waha, though Permian Basin gas flowing into SoCal through El Paso has been restricted. Kern saw flows through the Goodsprings compressor pick up this week, increasing to year-to-date highs, he said.

After a 26-cent gain to $2.81/MMBtu Monday, Opal fell 8 cents Tuesday to $2.73, while Waha retreated 13 cents to $2.62 Tuesday following a 28-cent gain in Monday's trading. Similarly, Kern River climbed 26 cents Monday before falling 7 cents to $2.74 Tuesday, according to Daily GPI prices.