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Cold Weather Spurs Further Strong Price Gains

Virtually all points were up strongly Tuesday on prospects of a northern cold snap continuing for a while longer. Most of the gains were in double digits, but quite a few points -- primarily in the Northeast -- rose by dollar-plus amounts.

Tuesday's upticks ranged from about a quarter to a little less than $1.70. A flat Westcoast Station 2 was the sole exception to the overall firmness.

The Northeast and Midwest can expect more severe cold Wednesday, with an "Alberta Clipper" storm moving into the Great Lakes region and spreading snow from the Upper Midwest to the upper Ohio Valley, according to The Weather Channel (TWC). Bitter cold will follow the storm into the Midwest and encourage residents of the region to stay inside Thanksgiving Day, TWC said. The Northeast should see much lighter precipitation, but temperatures will stay very low.

Conditions are expected to range more widely in the South and West. Cold will continue to prevail in the eastern South, even in Florida, which prompted Florida Gas Transmission to issue an Overage Alert Day notice (see Transportation Notes). However, temperatures will be fairly moderate in the South's western end. The forecast for the West is similarly divergent, with Wednesday's highs due to range from the 30s in parts of the Pacific Northwest and Rockies to the 80s in the desert Southwest, with top readings in the 70s expected in the lower elevations of California, TWC said.

Northwest-domestic recorded the West's only dollar-plus advance largely because of the pipeline's warning that OFOs might be necessary if shippers continued to overnominate northbound flows through two compressor stations (see Transportation Notes). On the other hand, PG&E injected a bearish note in the West by expanding a customer-specific high-linepack OFO into a systemwide one.

A producer who trades the Northeast said New York City-area lows will be in the 20s Wednesday, which caused stronger prices, "but they didn't run as much as some people had expected." Noting the screen increase of nearly 30 cents, he expects that and the cold weather to support "a little firmer pricing Wednesday, but no major advance like today's." He observed that forecasts from Accuweather and Earthsat were saying December will be colder but WSI (see related story) is saying warmer, so it was hard to tell whose prediction should get the nod. There was some convergence of Henry Hub cash with the screen Monday and a little bit more Tuesday, he said.

A Texas-based marketer begged to differ with the producer on prospects for Wednesday's prices, saying he expects them to be a little weaker despite the screen run-up because of slight moderation in northern temperatures and the extra-long Thanksgiving Day weekend. It looks like the coldest day of the week will be Wednesday in New England and the NYC area, while it should be Thursday for Chicago, he said. It looks like a seriously below normal temperature pattern will not set in again until the last half of next week, he said.

"Things are a real mess around here," said a trader who markets gas for several independent producers. She was referring to Tennessee's initiation of a hydrocarbon dew point (HDP) limit of 20 degrees F. on Line 800 in South Louisiana (see Transportation Notes). That required cutbacks of several producer clients' gas with higher HDPs because several of the South Louisiana processing plants are still offline, she said.

It's not such a problem along the Gulf Coast production area where the weather is fairly moderate, the trader said, but a lack of processing causes liquids to drop out of the flow stream as the gas gets taken farther north. As far as she is aware, TGT has the most stringent pipeline HDP limit of 10 degrees, "but all of our gas on TGT can get processed." She was a little annoyed about such problems cropping up so early in the heating season, saying, "We still haven't even had a well freeze-in yet."

Opinions also differed on early bidweek activity. The trader who markets on behalf of the producers said her perception of bidweek "is that it's already over" after Tuesday. A marketer tended to agree, saying he thought most December business was getting done quickly. "If you're a producer sitting around with some gas, depending on where it is, it may be to their advantage to wait," the marketer went on. But as far as he could tell, most buyers didn't want to wait. He guessed it boiled down to whether the buyers could persuade suppliers to part with their gas before the holiday or not.

But a Gulf Coast producer reported trying for some bidweek deals Tuesday, "but we didn't get much done." It looks like most December trading is going to get done next Monday since most traders take off early on Thanksgiving Eve, he said. At least there won't be a debacle like last year, he said, when an erroneous storage report coincided with the December futures expiration day and pushed the screen up more than a dollar on Thanksgiving Eve. He recalled the outcry that raised among marketers, end-users and utilities, who had to pay much more than expected for December 2004 baseload supply.

It's too early to tell on December 2005 index direction, the producer added, sine there still are a couple of more trading days left before December futures go off the board.

After a big weekend jump in the recovery of shut-in Gulf of Mexico production, the process has slowed down considerably again. Based on reports from 58 companies (66 were still reporting last week), Minerals Management Service said it counted 3,219.38 MMcf/d as still offline Tuesday. That was a reduction of only 49.90 MMcf/d from Monday's tally.

The National Weather Service (NWS) forecast for the Nov. 28-Dec. 2 workweek calls for below normal temperatures in the South Atlantic and Mid-Atlantic states along with Ohio and the eastern half of Indiana along with most of Pennsylvania and the southern end of New Jersey. It also expects below normal readings in Washington state, the northern end of Idaho and nearly all of Montana, the Dakotas and Nebraska. NWS predicted above normal temperatures in two sections: Louisiana and nearly all of South, East and Central Texas; and nearly all of California, Nevada and Utah along with the northwestern corner of Arizona.

Most analysts are leaning toward expecting storage injections to have continued for at least one more week into the traditional withdrawal season, even if only modestly. Citigroup's Kyle Cooper was among them, saying his final estimation for the week ending Nov. 18 looks for a build of 1-11 Bcf.

After the fizzling of Tropical Storm Gamma over the weekend, Atlantic tropical activity is quiet. However, a "large and strong" nontropical low centered about 900 miles west-southwest of the Azores Islands "could become Tropical Storm Delta at any time, TWC said, but it would not have any immediate threat to land areas.

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