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All Points Join Rally Driven by Cold, Futures

Buoyed by substantive heating load in many areas and the previous Friday's futures spike of 42.4 cents, cash prices rebounded Monday from weekend weakness by rising at all points. Nearly all of the gains were strong in double digits; only Sumas and Westcoast Station 2 failed to go up by a dime or more.

Increases ranged from less than a dime to around 80 cents; most of the largest ones were recorded at western points.

Outside the desert Southwest and the central and south-central sections of the U.S., lows were expected to hit the 30s or less Tuesday in most of the rest of the U.S. and Canada. The late-November chill is extending so far south that even the Miami Beach forecast called for a low in the mid 40s. Near-freezing overnight temperatures will be common in the Midwest and Northeast.

PG&E took some negative pressure off western quotes by lifting Sunday a high-inventory OFO that had been implemented for Saturday. The Southwest is also seeing some air conditioning load after several record highs were tied or broken Sunday, including 92 in Los Angeles and 88 in Phoenix, according to The Weather Channel. Near-record highs were expected once again Monday, the forecaster said.

However, there is some doubt about whether the cash market can sustain its rally any further this week. Cold weather in the South (where Birmingham, AL was expected to dip as low as 30 degrees Tuesday) will be yielding to near-average to slightly-above-average temperatures starting around midweek, while the National Weather Service predicts that above-normal conditions will dominate this week west of the Mississippi River (see Daily GPI, Nov. 16). And prior-day screen support will be missing in action Tuesday after December natural gas futures fell 16 cents Monday to settle just above the $8 level.

For a Midcontinent producer, it was a "flip a coin" judgment in predicting cash price direction on Tuesday. A fair amount of heating demand will persist into Wednesday, he noted, but the screen argued against further firming. However, he had no doubt whatsoever on a call about much lower numbers Wednesday. "I can easily see prices getting beaten up badly" for the long Thanksgiving weekend, he said, adding that temperatures will still be chilly in the Midwest late this week but 9-12 degrees above normal for late November.

The producer reported selling at the Consumers Energy citygate for December for a fixed price of $8.10, which was equivalent to plus 7 cents basis at the time of the sale, he said. He quoted Chicago deals at the NGI index plus 4-5 cents, and said MichCon was trading at index minus 2 cents (basis of plus 6-9 cents). Northern Natural-demarc and Panhandle Eastern deals were getting done at index flat to plus 0.25 cent and index plus 0.25 cent respectively, he said.

It seems like the December market is getting better bid as trading proceeds, the producer said. Referring to the substantial amount of next-month business that has already been done prior to the traditional start of bidweek (five business days prior to the end of the month), he noted that the late-year holiday period always tends to rush things along.

A Gulf Coast trader said her company was "trying real hard" Monday to finish December deals by Thanksgiving, but not finding as much interest as it had hoped. Only four points (in Louisiana, South Texas and West Texas) in which the company is interested had any December deals get done Monday on an on-line trading service, she said. Any December trading done last week almost certainly was indexed.

Saying that "for right now I'm pretty bearish," the trader said she expects cash softness to be setting in Tuesday and getting worse Wednesday. Prices always weaken for an extra-long holiday, and there's no reason to expect anything different this week with moderating weather trends in store, she said. "In fact, we may even have air conditioners getting turned on" in Texas, she said, noting that the Thanksgiving Day forecast for the Dallas-Fort Worth area calls for a high in the low to mid 80s.

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