Cold Keeps Prices Rising a Bit, But Not Expected to Last

Prices crept mildly higher in most cases Tuesday, continuing to feed on an early preview of winter in much of the East. A great majority of points ranged from flat to about a nickel higher. Exceptions included downturns for Northwest-domestic, Southern California border and a few Northeast citygates, along with a PG&E citygate gain of about 15 cents.

Despite huge upticks in the crude oil and heating oil futures contracts, a slightly softer natural gas screen provided little input for the cash market. Cold weather was expected to last into today but then yield to a warming trend that could arrest any further upward movement in prices. However, a marketer said his weather consultant is forecasting a return of significantly cold temperatures in northern market areas next week.

In a development that could inject more excitement into what many consider a general market lull currently, New York City-based PIRA Energy Group made a "preliminary estimate" of a meager 7 Bcf storage injection report by AGA next week (that would reflect this week's refill volume). A spokesman said PIRA based its projection on forecasts for degree day heating numbers through Friday, and also factored in data on gas production, power demand and imports. If Pira is right and the market only injects 7 Bcf this week (to be announced by the AGA Oct. 18) amid a relatively weak cold snap, it will be viewed as exceedingly bullish, compared to the AGA's five-year average of 58 Bcf for the same period. In previous injection cycles it hasn't been until the last week of October that single digit injections were seen.

Meanwhile, sources continued to predict AGA will report a number this afternoon similar to last week's 78 Bcf.

A western trader said several factors contributed to the PG&E citygate standing out with Tuesday's largest advance. Prices ran up pretty hard in volatile trading, he said. The utility's system is trending toward a short supply system, he said, and the cuts on the TransCanada-British Columbia system are still limiting border imports through today. But there also have been some supply cuts from the Southwest, and some citygate traders have been short through the first 10 days of the month, he said. In addition, people are still struggling to refill storage in the Consuming Region West, which was still recording net withdrawals in AGA's reports as recently as last month, he noted.

It's been better to buy at the PG&E citygate than at Malin this week, the trader said. Although Monday's Malin-citygate spread of 13 cents widened to nearly 30 cents Tuesday, there's still a transport squeeze, he added, estimating total Redwood Path variable costs at around 35 cents.

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