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Impending Weather Moderation Pulls Prices Down

On a day when some areas were experiencing their most frigid weather in the heating season so far, expectations that considerably more moderate conditions would be in place by early this week (Dec. 11-15) forced prices lower at nearly all points Friday. The nickel-plus drop by January futures a day earlier, bearish sentiment about the latest storage report and the decline of industrial load that typically accompanies a weekend also were negative factors in the cash market.

Only modest gains at Sumas, Westcoast Station 2, and NOVA Inventory Transfer numbers, averted a clean sweep of softness. Otherwise, price dips ranged from a couple of pennies to about 75 cents. The West harbored some of both the smallest and largest drops, while Northeast citygates saw major declines all around.

Although Florida Gas Transmission extended an Overage Alert Day through at least Friday, Florida Gas Zone 3 and the Florida citygate were among the leaders of the price descent. Three other pipelines announced plans to lift OFO-like constraints on Saturday (see Transportation Notes). However, Columbia Gas said a Critical Day designation for Market Areas 33 and 34 in Virginia (see Daily GPI, Dec. 7) would remain in place through at least Saturday.

Although the South could look forward to one more morning of frosty temperatures Saturday, with new date-specific record lows possible, a rapid warming trend was due to set in by Saturday evening, according to The Weather Channel. Moderation would already be under way by Saturday in the Midwest and Northeast. For the West, which had already been seeing mostly seasonal temperatures, a series of three storms bringing mountain snows into the Pacific Northwest would be the most prominent weekend weather feature.

"Bids were getting hit early this [Friday] morning," a Northeast marketer said, adding that the lack of buyers for weekend gas was highly noticeable. He said several utilities have indicated to him that they had separate strategies for the Dec. 1-15 and Dec. 16-31 periods. They would tend to buy spot gas for most of their needs in the first half of month, then start using storage a lot more in the last half, the marketer said. To him, that meant softening prices will pervade the market for most, if not all, of the rest of December.

The gas buyer for a Lower Midwest utility said Friday was a typical winter day for his company -- cold but dry with no snow, which was good for personal living but not for gas throughput. After seeing a high not much above 40 Friday, his city was predicted to rise into the 50s Saturday, he said. He reported having bought "a little" spot gas for the previous weekend, but added that late last week the utility had term and December baseload supplies under contract that it couldn't use for current burns, so it was putting the gas into storage.

The number of rigs actively searching for gas in the U.S. increased by 14 to 1,437 in the week ending Dec. 8, according to the Baker Hughes Rotary Rig Count (http://intelligencepress.com/features/bakerhughes/). That represented gains of 2% from a month earlier and 18% from a year ago, Baker Hughes said.

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