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Northeast, Chicago Spikes Lead Overall Gains

Triple-digit spikes at Northeast and Chicago citygates topped price increases at most points Friday. The show of strength even reached into the production area as Northern Natural-Ventura and Tennessee's 500 Leg got in on the act with advances exceeding $2 and $1, respectively. The market reacted to predictions that the coldest weather so far in the heating season will be firmly entrenched in most areas by the beginning of this week.

Firming quotes weren't universal, however, as several eastern points joined nearly all of the West in ranging from flat to a little more than 35 cents lower.

Gains ranged from a few pennies to about $6.35 at Transco Zone 6-New York City. Deliveries into the Big Apple topped out at $22, or $8 less than the $30 peaks seen on Wednesday and Thursday of the previous week. Their average was nearly $10 below the $24.93 achieved on Thursday of the previous week.

Pipeline restrictions on negative imbalances in response to the forecasts of severe cold grew as Tennessee said a systemwide OFO Action Alert will take effect Monday. Meanwhile, Southern expects an OFO to remain in effect through at least Tuesday (see Transportation Notes).

Northern Natural Gas extended a System Overrun Limitation through at least Saturday while projecting that its system weighted average temperatures would be minus 2 degrees Saturday, minus 6 degrees Sunday and minus 1 degree Monday. It's been rare to see a $10-plus quote for a production-area point since the hurricane-related supply disruptions of late 2005, but Ventura and Northern Natural-demarc peaked at $12 and $2, respectively.

Western quotes were softer at most locations because the region is forecast to see some weather moderation under way before the weekend ends. But the rest of the U.S. and Canada are set to do some shivering, although conditions in the South will be decidedly warmer than in northern market areas, where sub-zero wind chills are due. Morning lows this weekend were expected to be as cold as the minus 20s across the Upper Midwest, The Weather Channel said.

A Midcontinent producer noted that although most points saw their average price go up, they were in full retreat by the end of morning trading, which he attributed to storage gas "flooding the market." Spot prices started much higher and then crashed in late deals, he said. He cited Panhandle Eastern as an example, saying it started the day trading around $8.00, but later slipped about half a dollar.

The producer said he didn't blame the people selling gas out of storage, adding, "If you've got storage, now is the time to take it out and make money." He had some doubts about how long heating load will be able to continue supporting cash prices. "Sure, we're having [cold] weather, but there's too much storage," he said. He also reported being aware of some switching from natural gas to fuel oil going on because of high gas prices.

Southern was especially strong in the Gulf Coast, rising more than 80 cents, due to the OFO, a producer trading representative said. It was unusual to see such big price increases for a weekend period because industrial load tends to dry up then, she added. She hesitated to make a call on how long prices will keep rising, but noted that it will be "very cold for a while longer." North Texas is about to experience its coldest temperatures in a long time, she said.

A marketer had no hesitation in declaring he expected price softness to set in late this week as some areas started to emerge from the deep freeze. He thought it interesting that while Tennessee's 500 Leg in Louisiana jumped about $1.20, Zone 0 in Texas was flat. It might have to do with various transport constraints along the system, he said, but he suspected that maybe the Zone 0 weakness was due more to Texas gas being in great demand in the frigid Midwest, so traders tended to use other pipes instead of Tennessee.

The Chicago citygate spike was due to the sub-zero lows due there, the marketer continued, but it got an extra boost from Nicor Gas declaring Critical Days through the weekend. He noted that Michigan citygates were considerably more subdued (Consumers Energy was up less than a dime while MichCon fell about 15 cents) largely due to utilities in the Wolverine State having much greater access to storage than those in Chicago.

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