Cold, Screen Spur Prices to Resume Uphill Climb
Apparently the cash market was just taking a price-consolidation breather for the weekend because it returned to a steep upward track Monday. Only Florida citygates failed to rise by more than 30 cents, and the highly volatile California and Pacific Northwest markets led the price charge with gains of 60 cents or more.
It was a combination of current and upcoming cold weather and a sharply higher screen providing the momentum for cash advances, a marketer said. "Of course, weather was the primary mover behind futures," he added.
"These weather forecasts have a way of tantalizing folks into paying more for gas," said a Northeast marketer. A lot of Canadian supply was staying in the West, he said, "and what's coming East is very expensive and hardly worth it." Either Dawn storage is short "or they need the gas in Alberta," the marketer surmised. He also suspected that high California prices (a few Southern California border quotes surpassed $7.50) probably kept a substantial amount of Canadian gas in the West that otherwise would have moved eastward.
Really severe weather isn't due in the Northeast until later this week, so the marketer was a bit apprehensive about where prices might be then. However, he said, fuel oil is finally getting competitive with gas at regional burnertips, so some cogeneration plants switching are switching fuels and helping to keep gas prices from going through the roof.
Despite even colder weather due in the Northeast, a Gulf Coast source considers the market overheated, and looks for a leveling off of most prices today.
Supply constraints tended to make western price hikes among Monday's largest. One trader estimated about 200 MMcf/d of San Juan Basin gas was shut in due to well freeze-offs, and a Rockies marketer reported hearing of freeze-offs in the Opal Hub area. In addition, maintenance bottlenecks on Transwestern and El Paso helped boost California border prices to their market-leading average in the mid $7.30s.
A source reporting $115-150/MWh day-ahead electricity prices at Palo Verde said he heard a coal-fired generation plant had gone down Monday in the Four Corners area. PNM said its policy precluded discussion of its power plants' status, but any such outage would have been added to four western nuclear plants currently at zero capacity. However, three of those (Diablo Canyon 1, San Onofre 2 and Waterford 3) were at various stages of returning from refueling downtime, according to the Nuclear Regulatory Commission.
One marketer said his Malin prices were slightly above his PG&E citygates. Although in the overall market citygates averaged barely a nickel above Malin, that certainly wouldn't cover the price of Redwood Path transport, he noted. "Buying citygate and selling at Malin is obviously the best strategy in this situation," he said.
Northwest kept its OFO in place for the area north of Kemmerer (WY) Station, causing the price gap between Sumas and domestic gas to widen to about a dollar and a quarter.
A Northeast trader said he saw storage injections staying fairly strong through last Friday, so he anticipates an AGA injection figure around 25 Bcf Wednesday. However, that very well could be the last net injection report of the season, he said, because this week's cold snap is almost certain to result in AGA announcing withdrawals next week.
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