A majority of cash market trading points saw prices continue to fall Monday as unusually moderate mid-December weather kept heating load light in the East. The drop of nearly 15 cents in January futures Friday was a secondary depressant for cash numbers.

However, much of the West ranged from flat to about half a dollar higher as a storm that had caused major problems in the Pacific Northwest late last week wended its way through the Rockies and Four Corners region, leaving low temperatures in the 20s or less in its wake. Even California had freeze watches posted for Monday night in many interior valleys, according to The Weather Channel.

Monday’s losses were mostly modest in ranging from a couple of pennies to nearly 40 cents. The Gulf Coast, which is currently seeing almost no heating demand in the Southeast, tended to take most of the biggest price hits.

Although the East is currently experiencing above normal temperatures in many parts, with the South enjoying spring-like highs in the 60s and 70s, that will be changing about midweek as more seasonable weather returns. Whether that will translate into an overall cash rally is problematic, however, after futures plummeted another 33.4 cents Monday, leaving the January contract not far above the psychologically important $7 level. Expectations that the year-on-year storage surplus is likely to soar in the next two weekly reports also will make a rally in the physical market more difficult to achieve.

The impending return of eastern weather more closely resembling winter was somewhat reflected in MRT canceling a weekend System Protection Warning that had been issued to reflect mild temperatures in its service area, and Transco saying it could start taking nominations again to resolve due-pipeline imbalances (see Transportation Notes).

Heavy fog has forced closure of the Houston Ship Channel for much of the past few days, and the Houston Ship Channel Pilots Association said Monday the waterway would remain closed to traffic for at least the rest of that day. A Houston-based marketer said he doesn’t trade that point, but he doubted that the backup in tankers unable to deliver crude oil to Channel refineries had lasted long enough to put a serious dent in refinery gas purchases. He also believed that many such facilities keep oil in on-site storage tanks to tide them over during such circumstances.

Obviously there’s not a lot of demand anywhere in the East right now, the marketer continued, but he considered the fact that several points in the Midcontinent were flat to down only a few cents Monday was a sign of a coming build-up in demand. With cooler temperatures approaching in the East, he thought the cash market has a chance for a midweek rebound, although he conceded it might be a “flip a coin” rally.

However, a trader representing several Gulf Coast independent producers didn’t see any rally in the cards, based largely on the screen’s decline Monday and storage bearishness. Also, although eastern markets are due to start getting colder around midweek, she said it won’t be “cold cold” (that is, below normal temperatures). “You would think prices might be up a little” Tuesday because of the rise in heating load, she added, “but I don’t speculate any more” about next-day price movement after “too many wrong guesses.” She thought the fact that futures continued to fall in Access and hit the $7 level was a further argument against a cash rally.

It’s a cinch that the next two storage reports will show pretty small withdrawals, the trader said, “because we’re selling into markets that are injecting the gas.”

She said her company was trying to get January business going Monday so the traders can finish up early and enjoy the holidays, “but nobody wants to play with us.” But she expects a repeat of last month when many people tried to finish December baseload deals ahead of the holidays, making a lot of trading outside the traditional bidweek period of the last five business days of a month.

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