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Prices Up as Forecasts Hint at Extended Cold

Impending fresh invasions of the northern U.S. by frigid air from Canada, along with forecasts indicating that the current cold spell will last through at least next week, helped push prices higher by mostly moderate amounts at a majority of points Wednesday. A few instances of flat numbers were also in the mix.

Gains ranged from about C2 cents at the two Western Canada price points to as much as half a dollar or so. The flat points were in the Midcontinent/Midwest market.

An NGI source proved accurate in predicting Tuesday that following a negative screen settlement, the modest amount of strength in that afternoon's initial Access trading offered a chance for some price firmness Wednesday (see Daily GPI, Feb. 8).

After trading less than 15 cents back of the screen on Tuesday, Henry Hub's advance Wednesday combined with a 12.3-cent drop in March futures to cause a reversal of positions. The Hub was in the unusual position of commanding a premium of nearly 15 cents over the screen Wednesday.

Separate masses of polar air are due to be sweeping southward from Canada Thursday into the Midwest and Pacific Northwest, while highs are not expected to get much above freezing in the Northeast and much of the Mid-Atlantic. In the South, temperatures below seasonal norms will remain east of the Mississippi River.

The National Weather Service (NWS) predicts cold conditions for most of the U.S. during the Feb. 13-17 workweek. The only area where it sees above normal temperatures is in northeast Montana and the western half of South Dakota. Otherwise it expects below normal readings everywhere else except in the upper Plains states (including Minnesota) and in the southern three-fourths of California along with western Arizona, the southern two-thirds of Nevada and the southwest corner of Utah.

And in its eight-to-14-day outlook posted Wednesday, NWS forecasts below normal temperatures throughout the nation except in the southern tier of states from South Carolina through the southeast corner of New Mexico, although the northern half of Texas is included in the area expected to be below normal.

"This little taste of winter we're getting reminded me that I don't like it" personally, said a Northeast trader, adding that he must have been spoiled by the mildness of January. Actually, despite their fall, regional temperatures are still a little warmer than normal, he said. Cash prices came back down near the end of trading, he added, leading him to suspect that Wednesday's rally will be short-lived.

Basis from Appalachia to Northeast citygates got a little wider, the trader continued. He also noted that the Henry Hub to Transco Zone 6-New York City spread had expanded to more than a dollar.

The trader said he expects prices to be up next week if forecasts of widespread cold through then prove accurate. Saying it may be his "famous last words," he said he didn't think the market will see $10-plus gas again.

Minerals Management Service (MMS) said 47 companies reported 1,553.68 MMcf/d of gas production remaining offline in the Gulf of Mexico Wednesday due to shut-ins caused by Hurricanes Katrina and Rita last year. That was a decline of 101.90 MMcf/d since the agency's Jan. 25 report on shut-in statistics. Cumulative deferred production since Aug. 26 is now up to 631.326 Bcf, equivalent to 17.297% of the Gulf's normal annual output, MMS said.

Kyle Cooper of Citigroup said his final estimation of the storage withdrawal for the week ending Feb. 3 is 38-48 Bcf. And a Reuters news service survey of 29 industry players found a range of withdrawal expectations of 38-92 Bcf, averaging 59 Bcf.

While the current cold spell is in stark contrast to January's mildness, minimal snowpack across the nation is holding back the reins on any really frigid readings for the time being, according to the Weather 2000 consulting firm. In the first week of February temperatures for the central and eastern U.S. "have returned back again to their coldest levels since December, with 30s, 20s and 10s replacing the 40s and 50s experienced during the January thaw," it said in an advisory.

"During one of the climatologically coldest months of the year, these Canadian air masses rotating into the contiguous U.S. are not yet translating into particularly large negative anomalies, in large part due to the lack of national snowpack. In the central U.S. only the northern-tier states have snow, and the eastern coastal states remain mostly snow-free, disabling overnight lows from cooling very much, and preventing even more frigid daytime temperatures than would otherwise result. However, lake-effect events have currently been dumping [two to three] feet of snow on the leeward side of the Great Lakes, and Alberta Clippers (and possible Nor'easters) will be slowly laying down fresh snows that were largely erased in January."

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