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February Daily Market Makes Strong Start

The February aftermarket got off to a strong beginning Tuesday with advances across the board. They were spurred largely by the screen's huge run-up of nearly 90 cents the day before and to a lesser degree by modest growth in heating load.

Nearly all of the gains were in double digits. They ranged from about a nickel to 65 cents or so. Most of the largest increases were concentrated in the Northeast, which, despite having temperatures not far above freezing forecast for Wednesday, would still be above mid-winter norms.

Further screen support will be lacking for Wednesday trading as March futures, after waffling to either side of flat during the day, closed out Tuesday's session down 7.3 cents. Nymex's petroleum-based futures offerings also saw moderate retreats.

Most of the anticipated increases in heating load will occur in upper New England, the Upper Midwest and mountainous areas of the West, where heavy snows are predicted. On the other hand, most of the southern half of the U.S. will continue to see mild temperatures that seem entirely inappropriate for the beginning of February.

A Midcontinent producer said he realized he could have gotten higher prices for his February baseload supplies after the weekend but had completed his bidweek trading Friday. It was purely the Nymex spike that drove bidweek prices much higher Monday, he said, but few deals were getting done after the weekend. He reported a producer offering to sell an NGPL Midcontinent baseload package Tuesday, but said the producer turned down his company's $7.25 offer.

In day trading, the producer buying at the Chicago citygate, selling NGPL TexOk and stranding transport made a good deal early Tuesday, but it was advantageous to do the reverse later in the session. The weather will be getting a little bit colder about a week out, he said. He wasn't sure if cash prices would be able to keep extending their gains this week, but said they shouldn't lose much ground.

A Rockies marketer did expect firmer prices Wednesday, calling for cash gains of 10-15 cents. He said he was unaware of any still doing bidweek trading Tuesday. He said Questar Gas (the LDC, not the pipeline) caught his company by surprise by declaring an OFO for Feb. 1-7 that prohibits overdeliveries into the system due to high linepack. "We don't think it [OFO] was justified," he said.

A Gulf Coast trader who sells gas on behalf of several independent producers said she was too busy to talk much Tuesday afternoon because of having to shift gas from overnominated points. It's not something that applied to everyone, she explained; it's just that a misreading of meters caused specific points on her company's gathering system to be overnominated. There was little problem shifting the gas to available alternative points.

Ron Denhardt of Strategic Energy & Economic Research projects a storage withdrawal of 83 Bcf to be reported for the week ending Jan. 27. Colder than normal weather is expected in the second week of February, Denhardt commented, but it is likely to be too little too late to keep prices supported. "Working gas storage is likely to end March at over 1,500 Bcf, close to an all-time record," he said.

Citigroup's Kyle Cooper updated his estimation of the storage report to call for a draw "near 80 Bcf."

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