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Most Cash Points Move Lower, With Large Declines in Northeast

Slightly warmer weather, falling demand and weaker futures prices on Tuesday prompted most cash points to fall Wednesday, with the largest drops of $1-4 in the Northeast. However, a number of Midcontinent points rose anywhere from a few cents to 15 cents as colder weather returned to the regional forecast and small increases were seen in a number of other regions.

Aside from a few small increases in the Gulf Coast region, most regional points fell 10-50 cents, and in the West, most Rockies locations dropped 5-30 cents while several California points were down about a nickel on average.

Transco Zone 6 New York once again took the biggest hit in the daily market, falling more than $4 to the $11.30s on average. New England points were down $1.50-2.30 with Algonquin averaging in the $10.20s and Tennessee Zone 6 just under $10. Columbia Gas once again rose in contrast to the regional trend, averaging about $7.90, up nearly 40 cents.

"Cash prices peeled back a little on moderating weather in New England, but it's still colder than normal," noted a regional marketer. "We saw some good sendouts, certainly not like the craziness we saw earlier this week. I expect the market to continue to slightly soften ahead of the weekend and then we are expecting some colder temperatures to roll back in.

"I'm not terribly sure how the market area will react." He said prices should "maybe be a little lighter" on Thursday in New England but certainly not down $2.

He said Tennessee's market area OFO hasn't had a significant impact on prices. "They want you to be in balance and tighten things up a little bit. It's added to the volatility as you can imagine, but ostensibly you can't really point to a specific market change."

A utility buyer in the South said his company was pulling gas out of satellite LNG storage this week rather than buying swing gas. "We're not buying a whole lot of spot gas at these prices. Storage and LNG are displacing some of our swing purchases. We're doing the LNG partly for operational reasons. We want to drain the tank this winter and do some maintenance. It's cold, so it's a good time for us to do that. Plus the gas that's in the tanks has been in there for a real long time.

"We've had some high demand this week but not record demand. We had some gas that we were trying to backhaul from Joliet on ANR but that was cut because of the constraints on ANR into the Wisconsin market," he said. Although it was near 60 degrees in Tennessee on Wednesday, he said the forecast shows more cold weather moving in Thursday and Friday. "We should see some good demand again late in the week. It's going to be a high of 33 Thursday and Friday and 43 is normal."

Washington, DC-based Washington Gas Light reported record demand on Tuesday and Philadelphia-based PECO said it had its fifth highest gas sendout on record on Monday at 678 MMcf (see related stories).

Columbia Gas Transmission extended an alert to shippers for a sixth consecutive day on Wednesday, as below-normal temperatures continued to prompt large deliveries from its utility customers. The company declared Thursday a critical day, requiring shippers to keep supply closely in balance with demand in order to help maintain pipeline system integrity.

A Southeastern utility buyer said the cold weather since Martin Luther King Day has dramatically changed his company's storage situation on Texas Gas. "We were concerned about our storage levels being too high, but with this cold we are back to near or a little below our five-year average," he said. "We have contractual ratchet requirements. I think it was in January that Texas Gas even revised the required withdrawals because they expected a warm winter and difficulty reducing storage, but this cold has changed things back to normal. I think we'll be either normal or below normal before the end of the season."

As of Jan. 26, there was a total of 2,571 Bcf of working gas in storage in the Lower 48, according to the Energy Information Administration (EIA). That level was 152 Bcf more than the same time a year earlier and 454 Bcf more than the five-year average.

Forecasts for Thursday's weekly storage report from EIA are calling for an even larger withdrawal than the 186 Bcf reported last week for the week ending Jan. 26. A Reuters survey of 22 industry estimates showed a range of predictions of 198 to 240 Bcf and an average forecast of 218 Bcf. Citing heating degree days 18% colder than normal, Global Insight's Jim Osten said he's expecting a 215 Bcf withdrawal. He noted heating degree days (HDD) this week are expected to be 21% colder than normal, which could lead to a 221 Bcf withdrawal in next week's storage report.

Bentek Energy said it's expecting a 214 Bcf withdrawal in Thursday's report for the week ending Feb. 2., including a 129 Bcf draw in the East, 20 Bcf in the West and 65 Bcf in the Producing region. The Denver-based consulting firm noted that a 214 Bcf withdrawal would put working gas levels at 2,357 Bcf, or about 16 Bcf below levels last year and once again back within the range of working gas levels over the last five years -- the five-year high occurred last year at 2,373 Bcf on Feb. 2..

"For the first time in over a year, total stocks are below historical benchmarks: 0.7% below last year and 1% below the five-year high," Bentek said.

However, last week Bentek and most other forecasters overshot the storage number by a significant amount. Many were expecting a 200+ Bcf withdrawal. Bentek forecast 207 Bcf while the ICAP storage options auction came in at 215 Bcf, nearly 30 Bcf, or 16%, over the actual number reported by EIA.

Bentek said part of the reason for its mistaken prediction was the unusual behavior of mega storage operators Dominion Gas Transmission and Columbia Gas, both of which withdrew more gas than apparently was needed to serve demand. Bentek speculated that ratchet requirements in storage contracts on those systems forced customers to take extra gas from storage. Since Bentek uses the storage behavior of Dominion and Columbia to model the behavior of other operators in order to come up with a forecast for the weekly storage change, the odd behavior of the two big storage companies threw off Bentek's forecast.

Bentek said Columbia showed another "record" weekly storage withdrawal of 23.8 Bcf last week, "outstripping the previous week's 22.9 Bcf" withdrawal. Dominion withdrew 20 Bcf, according to Bentek and ANR and NGPL withdrew 14 Bcf and 13 Bcf, respectively.

If working gas levels fell by 214 Bcf last week, withdrawals averaging only 83 Bcf/week through the end of the heating season would be required to get working gas levels down to where they were on March 30 last year. The five-year average for withdrawals over that period is 92 Bcf/week.

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