Price Rises Get Smaller; Some Western Points Soften
The cash market showed signs of fatigue Wednesday in struggling to maintain this week's upward momentum. Most new gains were in the 5-15 cents range, and some western points were beating modest retreats. However, cash may get its second wind today after the screen reacted quite bullishly to AGA's first report of net storage withdrawals this season.
The December futures contract was muddling around on either side of flat while cash gas traded during the morning. However, it shot up nearly a quarter after AGA said storage inventories had fallen by 6 Bcf last week. The Consuming Region East and Producing Region actually continued to register small refills, AGA said, but those were outweighed by a drawdown of 11 Bcf in the Consuming Region West.
Another thing to consider, according to an eastern utility buyer, is the fact that this week's widespread cold snap is certain to result in a much larger withdrawal figure next week in which all three regions will be involved. "I know we're currently pulling from storage," he said. A "little bit of warm-up" is due by Friday, the buyer added, but then it will turn colder again for the weekend and stay cold through next week.
Despite a continuing emergency situation in California power generation and day-ahead electricity prices hitting $240/MWh, prices fell moderately in California, San Juan Basin and the Rockies. The San Juan drop of a little more than a dime was the day's largest despite transportation constraints on Transwestern and El Paso along with reports of well freeze-ups in the basin. However, El Paso canceled an OFO that had lasted two days and PG&E did not extend a customer-specific OFO.
Volatility was huge in the California market, sources agreed. Both the Southern California border and PG&E citygate started around $8.70 but were tanking at the end to the vicinity of $8, they said. A marketer thought the situation was rather ludicrous, saying California utilities and end-users were taking gas out of storage when they should still be refilling. (Southern California Gas had 66 Bcf in storage at the end of October, the most recent time for which figures were available, a spokeswoman said. The LDC's normal working capacity is 115 Bcf.)
The California Independent System Operator had issued Stage One and Two Electric Emergency alerts Monday and Tuesday after Daily GPI's deadline. However, it wasted no time Wednesday in declaring a Stage One alert that took effect at 7 a.m. PST. Its announcement contained a chilling equation for Californians: "Cold Weather + Low Imports + Plant Outages = Slim Operating Reserves." A large generator that tripped offline early Wednesday morning, contributing to nearly 12,000 MW of planned and unplanned plant outages, prompted the swift emergency alert, Cal-ISO said. In addition, the amount of power normally expected to be imported from the Pacific Northwest was cut by a third because it was needed in Washington and Oregon, "states also suffering from cold fall weather," it said.
Prices went in two directions on Northwest - up at Sumas and down for domestic gas. That widened the spread between the two points to about $2.40, and it was chiefly due to Northwest issuing a "must-flow OFO" requiring many shippers to send a tenth of their contract demand south through the Kemmerer (WY) Station constraint point (see Transportation Notes), a marketer said.
A Midwestern trader said forward December-March basis for Michigan citygates weakened to plus 24.5 Wednesday, down from plus 26 on Tuesday.
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