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Most Points Acknowledge Bearishness by Falling

Unable to deny negative fundamentals for the second day in a row, most of the cash market was down Wednesday. However, several points -- mostly in Texas, where it is warm enough to create some air conditioning load, and in the West, where much of the remaining heating demand resides -- were flat to as much as 15 cents higher.

Just as a screen loss of nearly a quarter Monday apparently had no effect on rising spot prices Tuesday, a vice versa influence seemed to follow as Tuesday's 13.1-cent uptick in futures was unable to avert the general cash softness Wednesday.

Northeast citygates recorded the largest of overall losses ranging from a little less than a nickel to 30 cents. Most Louisiana points saw double-digit declines.

Storminess will dominate Thursday's climate in the South and Midwest, but temperatures will be mostly mild in the two regions, with highs as low as the 30s occurring only near the Canadian border. Upper New England can also expect highs in the 30s, but overall the Northeast is in a warming trend. Meanwhile, the West continues to have significant heating load with below seasonal temperatures in almost every area outside the desert Southwest and Southern California. The cold will be most noticeable in the Pacific Northwest, "where snow levels will be very low," according to The Weather Channel.

It's a range-bound screen right now, said a Gulf Coast producer, so don't expect any big moves "as it grinds down to the $6.20 area." In the cash market, everything is a storage play now, he said. The Northeast is getting warmer again, while most of the rest of the U.S. outside the mountain West is already fairly mild for early March, he added. However, the producer noted that some cooling load may already be developing in parts of the South, especially Texas. He expects cash prices to keep weakening at least through the end of this week.

Decent basis spreads from the Midcontinent to the Northeast almost disappeared Wednesday, said a Midcontinent producer who reported having seen wide enough spreads recently to make shipping gas eastward profitable. Some Midcontinent pipes have started trading at odds with their normal price relationships to each other, he said, "which tells me storage withdrawals are growing" at varying rates on different pipelines.

A marketer in the Upper Midwest said area highs would be comfortably in the 50s Thursday and due to stay that way until a chance for snow showers arrives in the middle of next week. Temperatures should be back to normal then, she said. The marketer said all of her company's end-user customers have storage accounts with their LDCs, but several still asked her to buy Thursday supplies at Michigan citygates for them.

Minerals Management Service (MMS) said 47 companies reported 1,403.44 MMcf/d in remaining Gulf of Mexico shut-ins related to Hurricanes Katrina and Rita Wednesday. That was a drop of 100.66 MMcf/d from the Feb. 22 MMS report and represented a speed-up in recovery from the 49.58 MMcf/d drop recorded in the two-week period prior to Feb. 22. Offline supplies since Aug. 26, 2005, just before Katrina struck, now total 672.694 Bcf, which equals 18.43% of the Gulf's normal annual output of about 3.65 Tcf, MMS said.

The National Weather Service predicts below normal temperatures throughout nearly all of the western three-fourths of the U.S. during the March 13-17 workweek. More specifically, its forecast is for lower than average readings everywhere west of a line descending through central Michigan and northwest Indiana before running along the edges of southeast Illinois and Missouri, then curving southwestward through eastern Arkansas and the extreme northwest corner of Louisiana into central Texas. Above normal temperatures are expected in New Jersey, Pennsylvania, the Mid-Atlantic states and the Southeast as far west as southeastern Mississippi.

Global Insight analyst Jim Osten predicted storage draws of 108 Bcf for the week ending March 3 and 60 Bcf for the week ending March 10. Kyle Cooper of Citigroup made a final estimation of a 97-107 Bcf withdrawal for Thursday morning's report. The Reuters news service survey found an average of 110 Bcf in withdrawal expectations (see futures story).

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