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Most Holiday Weekend Prices Fall; Bidweek Quotes Weaker; Tropical Storm Delta Not a Threat to Gulf

Modest gains at a few Gulf Coast points prevented across the board weakness in Thanksgiving Eve spot prices. The OFO-depressed West led an overall slide Friday that was attributed to forecasts of slight moderation of cold temperatures in northern market areas and the extra loss of industrial load over a four-day holiday weekend.

Declines ranged from a little less than a nickel to nearly $1.70. A solid majority of the dollar-plus plunges occurred at points in the Midcontinent and West.

High-linepack OFOs by both of California's giant distributors, SoCalGas and PG&E (see Transportation Notes), had a much greater market impact at the southern end of the state. The PG&E citygate fell only about half a dollar, while the Southern California border topped all Wednesday losses to dive to nearly $1.50 under its northern neighbor's citygate levels.

Heavy lake-effect snows over much of the states around the Great Lakes were expected to continue along with bitter wind chills Thursday, but milder temperatures were due in the Plains area. The Northeast also would have to deal with snowfall from a fast-moving clipper storm, with accumulations of several inches possible in interior areas by Friday, according to The Weather Channel. It forecast generally moderate early-weekend temperatures for most of the South, and said that although the Rockies and parts of the Pacific Northwest would be feeling highs in the 30s, above seasonal readings would prevail for most of the West.

Although central Canada was enduring below-freezing conditions Wednesday, the more populous western and eastern ends were comfortably above freezing, The Weather Network reported. Western Canada was due to remain relatively moderate through Friday, it said, but Eastern Canada would be joining the sub-zero degrees C. area.

The traditional Nov. 30 end of the Atlantic hurricane season is rapidly approaching, but the 2005 season set the record bar even higher with the formation of Tropical Storm Delta over the central Atlantic Wednesday. It marked the year's 25th named storm. Delta was moving toward the south-southeast about 1,150 miles southwest of the Azores Islands that afternoon, but the National Hurricane Center projected that it would turn to a northerly tracking over the holiday weekend. Such a path would keep Delta far out in the Atlantic and thus no threat to the offshore production area.

With analysts tending to favor one more net injection into storage nearly three full weeks after the traditional withdrawal season started, the Energy Information Administration confounded most of them by reporting the season's first pull (8 Bcf) for the week ending Nov. 18. That might have seemed bullish, and indeed the screen did cross over from the red to spend some time in positive territory. But in comparison with a year ago, when withdrawals had begun earlier and the comparable week showed a pull of 15 Bcf, the initial glow faded and December futures eventually closed up a scant 0.6 cents.

Restoration of shut-in Gulf of Mexico supplies was weak again. With 57 companies reporting, Minerals Management Service (MMS) said outages had dwindled by only 23.60 MMcf/d from the day before to 3,195.78 MMcf/d Wednesday. Nevertheless that was a substantial 422.03 MMcf/d less than the previous Friday's count. Cumulative shut-ins since Aug. 26 stood at 473.547 Bcf Wednesday, or 12.974% of the Gulf's normal annual output of about 3.65 Tcf, MMS said. One mobile drilling rig and 134 platforms remain evacuated.

In his "NaturalGasWeekly" commentary, Global Insight's Jim Osten observed that one of the "casualties" of the hurricane-related run-up in Gulf Coast spot prices has been normal basis differentials between Texas and Louisiana points (Louisiana prices were $2 or more greater than East and South Texas numbers in many cases in Wednesday's Daily GPI price table). "With almost all of the production losses occurring in Louisiana or in the offshore pipelines landing in this state, the east of the Mississippi market is burdened with almost the entire shortfall in production," Osten said. "With pipelines from Texas to Louisiana full, prices have decoupled.

"Houston [Ship Channel] prices will converge with those at Henry Hub once production has been restored and any transportation across the Sabine River between Texas and Louisiana becomes available to interruptible shippers. Given the likely warm winter in the West and the normal-to-cool temperatures in the East, there could still be spikes in the east-to-west basis this winter."

A Houston-based marketer said his company was closed Wednesday, having "gotten flat" on its trading positions Tuesday so it wouldn't have to deal with the holiday weekend market.

A Texas-based trader saw "nothing exciting" in the western daily market other than the California OFOs. She reported doing these December deals Wednesday: Southern California border at Needles in the mid $8.90s and Waha in a range from the high $8.40s to the high $8.50s. Bidweek numbers were trending downward from Tuesday's levels in the morning along with the screen, she said.

A Midcontinent producer said he was seeing "a lot of volatility, and a lot of opportunities to make money" in December trading Wednesday. He reported doing bidweek basis deals at minus $2.40 at Northern Natural-demarc; minus $3.05 on NGPL-Midcontinent; and minus $2.90 on Panhandle Eastern (Panhandle was being offered at $3.15 and bid at $2.82 Wednesday, he said.) Basis had weakened a great deal since last week, he added, when he had done some Panhandle basis deals at minus $2.30.

Index deals were "looking weak and well offered in the Midcontinent," where he was seeing very small fixed-price volumes, the producer went on. The December market is looking so weak now that producers want to sell at index-plus, not basis, he said. But marketers see the downward pressure on basis and are anticipating lower bidweek prices after the weekend. It's largely a case of new production competing with storage gas withdrawals, he said.

The producer said he sold the Chicago citygate at index plus 4 cents Tuesday, but was seeing some index plus 2 cents citygates changing hands Wednesday. Alliance deliveries were commanding a premium over NGPL citygates at Nicor and NIPSCO, he said. He reported Alliance being offered at index plus 7 cents and bid at plus 2 cents Wednesday.

"It's not too cold here today [Wednesday]" in the 60s, a Lower Midwest utility buyer, but temperatures would be falling on Thanksgiving. He confirmed the producer's report of weakening basis, saying he was offered demarc at basis at minus $2.00-10 earlier in the week. "Doesn't that indicate that futures is overpriced?" he asked rhetorically. "Those Nymex traders, they say it's going to be cold in pushing prices higher. Well, it's nearly winter, so isn't it supposed to be cold?" The buyer said his company was pretty well covered by winter term deals, so he didn't expect to buy any baseload for November.

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