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Cash Rises Sharply Following Futures Strength, Cooler Temps

Cash traders turned their attention away from the current mild weather Wednesday and toward colder temperatures later this week and next -- outside the Northeast. The cool-down, along with the continuing futures strength on the Nymex, prompted daily cash increases of $0.60-1.50/MMBtu.

The near-month futures contract had another positive day, rising 6.8 cents to close at $7.823. December posted a morning high of $8.04. Cash traders apparently had an eye on that retest of the $8 area, which futures brokers said was related to expectations for a cold blast into the Upper Midwest and Midcontinent next week.

"The cash increases were all Nymex related," said a Northeast marketer. "Basis is still weak in the Northeast. We had the same few buyers out in the market [Wednesday] that we had [Tuesday]. There's been no real change for us despite the apparent price gyrations. I think the story may be a little different in the West and Midwest, but the Northeast is going to remain warmer than normal for a while."

Most of the country enjoyed warm weather again Wednesday, with Denver's high near record levels in the mid 80s, Los Angeles topping out in the high 70s, Chicago in the high 60s, Minneapolis in the low 70s, New York at 61 and Kansas City reaching a high of 77.

But Denver's highs are expected to fall 30 degrees by Saturday. The high in Chicago is expected to drop 25 degrees over that period and other Midwest and Midcontinent markets will follow suit. The Pacific Northwest also will get colder. The Northeast, meanwhile, is expected to remain mild through Saturday as is some of the Southeast and Southern California.

"Rockies prices were up drastically today compared to yesterday with the maintenance expected to end on Kern River and cooler weather expected later in the week. The main underlying factor behind the large decreases earlier in the week was lack of demand," said a Rockies marketer. "We're still extremely warm. We also had some pipeline constraints on Kern River and Northwest pipeline. Gas was backing up and prices were falling. Now we've seen some of those constraints lifted and the weather is expected to cool into the weekend."

A number of Rockies points jumped more than a dollar, with CIG reaching $3.40, Opal approaching $3.50 and Northwest Domestic in the high $3.60s. But Rockies prices obviously are still quite depressed. Stanfield and Sumas were around the $7 mark. Points in the Northeast, meanwhile, topped $8.

"I don't think western prices will go up much from here," the Rockies marketer said, "particularly in the Pacific Northwest. Sure we'll probably follow the Nymex around, but there shouldn't be too much upside because temperatures will be near normal and storage is full."

A Midwest trader said Nicor was limiting receipts into its system because of mild temperatures and light demand, which made it a premium location compared to Peoples and Nipsco. Chicago citygate prices were up about 70 cents to the $7.40s, which was only about a nickel above Henry Hub cash and still well below near-month futures. The Midcontinent fields rebounded but trading was lighter Wednesday than on Tuesday. ANR Southwest and Williams both rose more than $1 and Panhandle's jump was nearly $1 compared to Tuesday to the low $6.40s.

Predictions for Thursday's storage report range from a 32 Bcf withdrawal to a 10 Bcf injection, according to a Reuters survey. Heating degree days average 17% above (colder) normal last week, slightly more than the previous week when a 9 Bcf withdrawal was reported. Global Insight's Jim Osten said he's predicting a 10 Bcf withdrawal in Thursday's report. Bentek Energy is expecting a 1 Bcf withdrawal, including a 7 Bcf withdrawal in the East region and a 6 Bcf injection in the Producing region and no change in the West region. Bentek said six storage facilities indicate working gas levels above maximum capacity and eight others show working gas levels between 95% and 99% full.

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