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Most Points Up as Coldest Weather of Season Looms

The headline on The Weather Channel's (TWC) next-day forecast posted Thursday afternoon said it all: "Bitter cold for much of the country." As could be expected, prices continued to rise at most points Thursday, with only a few flat to nearly 20 cents lower Northeast citygates preventing all-points gains.

Nearly all of the upticks were smaller than the day before in ranging from a couple of pennies to about 75 cents. Cheyenne Hub, by virtue of its ability to dispatch gas to markets in both the Rockies (where sub-zero lows are due Friday) and the Midcontinent/Midwest, topped the overall advance.

Transco Zone 6 New York City, which fell a little more than a nickel, was completely out of the $10s for the first time in more than a week.

Other than South Texas and southern Florida, it's not going to be very comfortable for anybody in the next few days. Forecasts for the coming week indicate that the coldest temperatures of the 2006-07 heating season will be arriving, with the big chill starting Friday or over the weekend for many.

The West will be the first region to start recovering from the current blast of cold. By next Monday and Tuesday areas west of the Rockies will be a "balmy" five to 15 degrees above average, TWC said. That equates to a temperature range "from the 50s in western Washington to the 70s and 80s in Southern California, southern Nevada and both western and southern Arizona," it said. "At the same time Montana will moderate into the 20s and 30s while Wyoming and Colorado warm into the 30s and 40s."

The slew of pipelines with OFOs or similar measures already in place or due to begin over the weekend (see Transportation Notes) provides a clue that the industry will be facing a challenge lasting well into next week. Even the pipes who haven't announced an OFO-like action have posted notices to shippers about being sure to stay in balance as closely as possible. Kern River reported low linepack systemwide.

Because of the intense cold setting up over the weekend, prices are expected to remain on the rise Friday despite March futures extending Wednesday's decline into a second day Thursday and the typical softening effect of a weekend loss of industrial load.

The Energy Information Administration was within the range of prior expectations but considerably below consensus estimates centered around 200 Bcf when it reported a storage withdrawal of 186 Bcf. Although the report sliced another chunk off the year-on-year surplus, Nymex traders sent an initially stronger March futures contract 13.7 cents lower on the day in response.

Citigroup analyst Tim Evans said the withdrawal number "lowers the base demand level for the upcoming reports and also suggests a decreased sensitivity to the cold as the mercury plunges. Larger withdrawals will follow in the next two reports, but it looks more like 200 [Bcf] and 230 rather than 215 and 250."

A Midwest utility buyer said her company is anticipating profitable throughput because its service area hasn't seen temperatures this low for "quite a while." Nighttime lows are predicted to sink below zero from Friday through Tuesday, she said. It looks like the super-frigid conditions will start to let up a bit around Wednesday of next week, she said. Before then, though, it should be a "very interesting weekend ahead," she added.

The buyer noted that the System Overrun Limitation declared by Northern Natural Gas (see Transportation Notes) was only a "partial" one because the pipeline is "allowing some of our no-notice gas to flow."

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