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Lack of Heating Load Reasserts Itself in Falling Prices

Weighed down by continuing mild weather in most of the East, with heating load starting to recede again in the Rockies and Plains after a blizzard had passed, and by a January futures drop of more than 31 cents a day earlier, the cash market was in retreat at nearly all points Thursday. Only a couple of flat to slightly higher locations in the still-frigid Rockies avoided the overall softness.

Kern River, which reported low linepack systemwide Thursday, eked out a tiny gain while Northwest-domestic was flat. Otherwise, cash losses ranged from a couple of pennies to a little more than 45 cents. The Gulf Coast and Northeast recorded most of the largest declines, while Rockies points held up most firmly.

In reporting a storage withdrawal of 71 Bcf for the week ending Dec. 15, the Energy Information Administration surpassed consensus expectations in the low 60s Bcf. Although the year-on-year surplus rose nearly 100 Bcf as a result of the report, Nymex traders accorded it a slightly bullish response by pushing the January contract up 3.1 cents on the day.

However, it is highly unlikely that the modest screen rally will be able to keep cash prices from sinking further Friday. Although temperatures in the South will be cooling a little going into the weekend, weather will remain above normal for the most part in the East. Mercury readings will be returning to approximately seasonal levels in the West despite a new series of storms moving from the ocean into the Pacific Northwest.

The long Christmas holiday weekend will be another strong deterent to any price rebounds.

Northern Natural Gas provided another clue about the weakness of Midcontinent/Midwest prices. Its bulletin board said the normal system weighted temperature at this time is 19 degrees, but the pipeline was projecting averages of 34 Thursday, 31 Friday, 26 Saturday and 29 Sunday.

Mild weather pretty well sums up the current market, and that will remain the overall outlook well into January, a Midcontinent marketer said. That means a weak cash market for the foreseeable future, of course, he added.

The marketer said he expects a slow bidweek all around, commenting that he wasn't seeing much January business getting done Thursday. There doesn't seem to be much of a rush to finish before Christmas, he said, adding that activity was so quiet Thursday afternoon that "I don't even hear any phones ringing" around his company's office.

A West Coast source thinks next Tuesday and Wednesday will be the big days for January business because of futures expiring Wednesday. Then a lot of traders will take the rest of week off, he predicted. He suspected that with the recent severe blizzard, there likely were some wellhead freeze-offs occurring in the Rockies, but he hadn't heard any specific reports of that happening.

A Rockies marketer also said his company wasn't hearing about any freeze-offs. He thought it was "strange" that almost the entire market had managed to rally on Wednesday. It was justified in the West because "it's really cold here," he said, but the eastern upticks seemed rather questionable based on weather factors. He thought the overall firmness was more a result of "basis tightening" instead of actual demand. However, he went on, he is aware of some people injecting into storage because January futures is the lowest contract in the Nymex strip at this point.

"Too Darn Warm! That's the [market] headline in our area," said a utility buyer in the Lower Midwest. His company has some storage injection space for excess gas that it can't burn now, but if the mild weather keeps up much longer, it may have to start reselling winter term supplies because the contracts won't let the utility turn the gas back, he said.

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