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Cash Prices End Mixed; Rockies Points Still Take Beating

Cash prices were mixed Tuesday in every region of the country as mild weather remained the trend. Market direction was mainly down again in the Rockies, where some points, including Northwest Pipeline and CIG, continued to collapse because of weak demand, full storage and transportation constraints. In contrast, most points in the Midcontinent/Midwest posted increases of 1-30 cents.

"I think we've seen some storage injection buying kicking in out there, but I don't really think it can last much longer, maybe another day or two," said a marketer in the Midcontinent region. "We had those few weeks of colder than normal weather and the first net withdrawal of the season, and I think that created a little space that people are now trying to fill back up. Spreads make that work right now so if you can do it you should. But there's only so much space left. After all, storage is darn near record levels, even more than what was thought to be 100% full at some fields. I think prices will fall hard for the weekend."

Consultant Stephen Smith is predicting several more weeks of net injections into storage, including a 6 Bcf storage injection in this week's Energy Information Administration (EIA) storage report for the week that ended Nov. 3 and a 12 Bcf injection for the week ending Nov. 10. Consultant Ron Denhardt of Strategic Energy and Economic Research said he's forecasting a 21 Bcf withdrawal in this week's storage report, and a Reuters survey shows market expectations ranging from a 12 Bcf injection to a 32 Bcf withdrawal.

The weather is very mild right now. High temperatures Tuesday afternoon ranged from the high 40s in the coldest areas of the country to the 90s in Southern California and South Texas. Across the bulk of the nation, temperatures ranged from the upper 50s to low 70s. The National Weather Service's six to 10-day forecast showed little change. Above normal temperatures are expected for the Northeast, eastern Great Lakes, Mid Atlantic and South Atlantic, as well as part of the Southwest corner of the nation. Below normal temperatures are expected over the Upper Midwest, Northern Rockies and the northern part of the Pacific Northwest. And normal temperatures are expected over the rest of the nation.

"With no change in this mild weather, this bearish market is going to continue. We won't see colder weather until the weekend in Chicago so I think it will be next week before there's a possibility that prices could post gains," said a Midcontinent marketer.

Citigroup futures analyst Tim Evans said, "Mid-range weather forecasts point to the possibility the warmer than normal temperatures over the next few weeks may set up a warmer than normal December. If that's the case, we note it will compare to some bitter cold from last year and some big storage withdrawals. January could be a different and more supportive contrast, but there could be a serious test of the downside before the market gets there."

Spot prices were mixed in the Gulf Coast region on Tuesday. Most Louisiana points lost ground, but South and East Texas points gained a few cents. Henry Hub fell a little more than a dime to $6.61 with more than a 60-cent trading range. However, Katy, Carthage and the Houston Ship Channel all posted 5-10-cent increases with Katy averaging $6.00. NGPL South Texas rose more than 20 cents to $5.87.

Several sources reported some continuing power generation load. "There isn't any AC load out there right now where I am, so it must be just gas plants being dispatched because they are cheaper to run than oil. I think that's been going on for some time. We thought it would stop, but it's still going on. At least twice a day I get calls for intraday business from the gen crowd."

A New England marketer also said generation load has continued to support the intraday market. Denver-based consulting firm Bentek Energy said last week that gas demand from generation remains above levels last year, in part due to more nuclear maintenance outages. Gas demand from power generation on Wednesday last week was running about 24% higher than levels at the same time last year, according to Bentek's data.

Bentek Chief Technology Officer Rusty Braziel said he believes there has been at least a 2 Bcf/d increase in gas demand from power generation this year compared to last because of nuclear maintenance. About 35 nuclear units were out of service or operating at less than 100% power on Tuesday, representing a total loss of 19,220 MW of power, according to the Nuclear Regulatory Commission's daily status report.

The Northeast, Chicago and Michigan points were all generally either side of flat. And on the West Coast, California points were mixed with PG&E Citygate rising slightly and SoCal border points losing nearly 15 cents.

Rockies gas, however, remained the market's unwanted stepchild. While the lows were a bit higher than on Monday -- still an abysmal $1.95/MMBtu on CIG and $1.85 on Northwest -- the averages were down sharply. CIG averaged in the mid $2.20s, down more than 70 cents. Opal was down 75 cents to just under $2.20, Northwest domestic plummeted more than $1.20 and Northwest South of Green River collapsed more than $1.60 to the $2.30s.

Northwest Pipeline warned that its Jackson Prairie storage position has fallen below a threshold for offsetting operational flow orders because of customer drafting and overscheduling at the Kemmerer station. As a result, the pipeline said it will move its balancing gas from Clay Basin storage to Jackson Prairie. Shippers are requested to realign supplies from domestic supply points to Canadian supply points, and avoid drafting gas north of Kemmerer. If the situation does not improve, Northwest said it would be forced to issue operational flow orders.

Meanwhile, proving that eastbound market access commands a premium in the Rockies, Cheyenne Hub came in at about $5.25, up more than 35 cents on the day.

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