With last week’s blasts of frigid weather only a memory in many areas, cash prices were overwhelmingly lower at most points Tuesday. Many locations in the Northeast and Gulf Coast plummeted by triple-digit amounts. Only some points in the Rockies, Pacific Northwest and Western Canada, where below-normal temperatures will be concentrated this week, ran against the overall market grain with numbers that were flat to about a nickel higher.

As it did late last week, Transco Zone 6’s New York City pool led the general market’s headlong plunge with a drop of more than $3.90. Otherwise, Tuesday’s declines ranged from a couple of pennies to about $2.50. The dive of about $2.50 occurred at Florida Gas Zone 3 after the pipeline ended an Overage Alert Day during the holiday weekend (see Transportation Notes). Southern Natural Gas also saw a $2-plus decline, having lifted an OFO Saturday.

Spring-like weather is emerging in parts of the South, especially at the region’s western end where highs in the 70s are predicted for Wednesday in most of Louisiana and Texas. Lows around freezing will remain in the populous market areas of the Midwest and Northeast, but that’s a far cry from the sub-zero wind chills that were prevalent about this time last week.

PG&E and SoCalGas encountered high-linepack problems during the long weekend, prompting both giant California utilities to issue OFOs (see Transportation Notes). However, neither OFO remains in effect and California prices were only slightly lower Tuesday.

March natural gas futures continued to show strength, rebounding from morning levels spent in the red to a daily settlement at $7.585, up 8.2 cents, in what one source said was the result of “range-bound trading.”

One major impact of last week’s startup of service on the second segment of the first leg of the Rockies Express Pipeline (REX) project (see Daily GPI, Feb. 15) was expected to be some mitigation, if not elimination, of the price differential between Opal and Cheyenne Hub in the Rockies, according to a report released Tuesday by Golden, CO-based Bentek Energy. Cheyenne carried an average 16-cent premium to Opal during 2005, which increased to 39 cents in 2006 and has soared to 81 cents in the months since Sept. 1, 2006, Bentek said.

The mitigation prospect has been borne out by NGI‘s price survey. On Monday and Tuesday of last week Cheyenne Hub quotes exceeded Opal’s by more than a dollar; then on Wednesday when REX began flows from Wamsutter Hub in Wyoming to Cheyenne, the differential shrank to about 85 cents. The erosion of the spread has continued. In Friday’s trading for the holiday weekend the hub premium was down to 37 cents, and on Tuesday it had further dwindled to about 30 cents.

“Why does the differential exist?” Bentek asked in its report. Answering itself, the consulting firm said, “Cheyenne Hub connects to multiple Midwestern markets as well as markets along the Front Range of Colorado. Particularly with the completion of Cheyenne Plains in 2005, gas from Cheyenne has access to Midwest and Eastern markets, providing the highest value market for Rockies gas most of the time. Thus, demand at Cheyenne Hub is typically strong, drawing supply from Rockies producing basins.”

The eastern U.S. warm-up might be reason to expect further cash softness Wednesday, but a Texas-based marketer said he wasn’t so sure, based on the modest show of futures strength Tuesday. Actually, he said, he thinks cash prices will tend to level off. Not only will there be the prior-day screen support, but it’s due to get “a little colder” again in northern market areas over the next couple of days, the marketer said. For now, though, he finds the market “pretty boring,” saying his company is “just trying to move some gas to the Northeast and make a little money” in the process.

With bidweek approaching, the marketer said he hasn’t seen anything about March business yet. “There might be something out there,” he acknowledged, but it hasn’t gotten through to him.

In its forecast for the Feb. 26-March 2 workweek, the National Weather Service (NWS) predicts above-normal temperatures everywhere east of a line running generally southward from eastern Michigan to the western end of the Florida Panhandle. Below-normal mercury levels are due everywhere west of a line going southeastward from northwest North Dakota through central Illinois before curving back to the southwest along the eastern edge of Arkansas into central Louisiana, NWS said.

Citigroup analyst Tim Evans expects a storage withdrawal of 225 Bcf to be reported for the week ending Feb. 16.

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