The sudden 20-cent jump in gas futures prices yesterdayinitially left most of the cash market behind with cold weathercurrently confined mostly to the Rockies and upper Midwest.However, late in the day cash prices gained enough ground to boostdaily averages up about a dime.

The western cold front is poised to make its way east, and a newforecast by the National Weather Service shows below normaltemperatures across a large part of the country over the next sixto 10 days. The market may have found enough support for the restof this week and possibly into next.

There still are huge spreads between current cash and Decemberfutures. “Cash was quite weak today compared to the strength of theNymex,” one trader noted. “Prices in Chicago have been 25 to 30cents behind the screen. Weather seems to be on the horizon, but ithasn’t really been affecting the cash prices yet.”

Several observers admitted being surprised by the Nymex jump atthe open given the absence of significant fundamental news untilthe NWS report late in the afternoon. “I’d say we were a littlethrown off guard given the previous day’s decline. The Henry Hubrange was $4.63 to $4.73 with most of the morning in the mid-60sand later deals above $4.70,” said a Gulf Coast region marketer.”Tetco West LA, which spent most of the morning around $4.48, wasbid as high as $4.65 at the end. That was a big move late. We’restill seeing a 30-cent spread on the hub compared to futures.There’s plenty of reason to buy gas and store it or keep that gasin the ground if you have it.”

As always, the AGA storage report will be a major factorinfluencing prices for the remainder of the week and perhaps longergiven that this report probably will show the last or second tolast net injection for the year. Early predictions have the weeklystorage refill pegged at around 30 Bcf with a potential rangebetween 24 Bcf and 56 Bcf.

However, during the same week last year only 12 Bcf was injectedand the highest injection for the week since AGA started its surveyis 34 Bcf. Given the reaction of futures to the report recently, itis impossible to predict which direction prices will go even if theinjection is extremely large or small. “The bulls are hungry rightnow and they’ll eat anything you feed them,” said one trader, whobelieves even a massive weekly injection will trigger a spikesimilar to what occurred last week when 70 Bcf was the weeklyfigure.

Nevertheless, working gas levels are much higher now than manyobservers predicted they would be. Storage in the key EasternConsuming region is 91% full. Overall, working gas levels at 2.7Tcf are only 7% less than the five-year average and still rising.

The relatively comfortable level of working gas in the eastright now is part of the reason Northeast prices have been softrelative to the production area, said one source. “Tetco M3 hasbeen trading 30 cents over the hub because of no weather and adecline in injection demand. TCo [Columbia Gas] is 18-20 centsover. CNG has been trading around 27 cents to the hub and New Yorkhas been trading probably about 35 cents over the hub,” he said.”The increases today were purely a financial play. Until we getthis cool weather next week, I think the spreads will stayrelatively weak.”

In contrast, it’s been a pure weather play out in the Rockiesand Pacific Northwest, although a low line pack OFO on El Paso inthe San Juan Basin has added some support as well. “The onlyexception is the SoCal border,” said one marketer. “They havemoderate weather out there so basin prices must be driving it up.SoCal border is well above index; it’s in the low $5.60s and indexwas $5.18. The Midcontinent and San Juan Basin are up only a dimeor so above index, so I’m not sure what’s driving the border.

“It’s cold here in Denver,” he noted. We’re also still trying tobuy for storage, but prices have to get down to a certain levelbefore we can do that and it looks like it could be a long wait.We’re looking at a week of pretty cold weather where it’s notsupposed to get out of the 40s.”

There was a little bit more gas (400 MMcf/d) making its way outof Alberta Monday and Tuesday because of an ANG maintenance outagethat ended. That may have put some downward pressure on prices, butcold weather continued to provide enough support to produce dailygains of more than a dime in the Pacific Northwest. “If it wasn’tfor the Merc [Nymex], I think Sumas would be down a lot more,” saida marketer.

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