Northeast traders woke up to a Monday morning surprise as bitter cold sent cash prices to a high of $20 at Transco Zone 6 New York and an average well over $12, which was up more than $4 from weekend price levels. New England Citygates on Algonquin jumped to highs of $18 and averaged over $14, up more than $6/MMBtu from Friday. Outside the Northeast, however, price volatility was subdued and price changes were mixed.
The high in Boston Tuesday is expected to be only 17 degrees compared to 38 on Monday and wind chills are expected to drop temperatures to dangerously low levels. Lows are expected to be in the single digits and the high winds were expected to cut temperatures to 20 below zero Tuesday morning. Similar weather was expected in the Great Lakes.
"It's going to get pretty darn cold here in Michigan, close to zero and windy," said a regional marketer. "The low tonight will be about 4 degrees and the high will be in the mid 20s with similar situation Tuesday and Wednesday. But by the weekend we should be above freezing even at night, so we're hoping that although March looks like it's going in like a lion, it will go out like a lamb."
Northeast traders said they were "bracing for the worst" in terms of pipeline capacity constraints. "There's always an issue when this kind of stuff occurs and few people were really expecting it," a Northeast marketer said. "We had a lull there for a few days where it was mild and there were no pipeline restrictions to speak of and now they are probably going to come back in the Northeast. Hopefully it won't be a big issue, but you just don't ever know."
Algonquin Gas Transmission on Monday urged all shippers to "carefully review demands for gas and schedule gas consistent with daily needs and to tender and receive gas consistent with confirmed nominations.
"In order to maintain operational flexibility and system reliability for firm transportation, AGT may take action to ensure shippers and point operators limit the due pipeline daily variance between scheduled deliveries and actual deliveries to 2% or less," the pipeline said. "If AGT does enact such measure, any deliveries that exceed scheduled deliveries by greater than 2% will be deemed unauthorized quantities and will be charged a penalty equal to three times the Gas Daily posting for the high common price for the AGT Citygate posting...on the day the violation occurred..."
Columbia Gas Transmission called Tuesday a "critical day" in its market areas, saying all available capacity would be needed in order to meet firm service obligations. "Therefore, zero nonfirm capacity is available." Tennessee and Transco constraints were restricting some interruptible flows but significant IT was still available at many locations.
"I think in a few days it will all be over in the Northeast. But today we're just covering our shorts everywhere," the Northeast marketer said. "Everybody went into March planning for relatively mild weather. We just didn't plan for a run-up to $12 or more, much more in some cases."
The price spread between Transco Z. 6 New York and Henry Hub jumped to more than $5.00 Monday from an average of about plus 76 cents since Feb. 20. Most of the points in the Gulf Coast Monday were up anywhere from only a few cents to nearly 30 cents, but a few locations even showed small declines.
A similar story was seen in the Midcontinent/Midwest where the majority of points gained 2-15 cents, except for a few weak locations, such as Oneok and Williams. Chicago was up nearly a dime despite moderate temperatures. Chicago, which averaged in the mid $7.30s, was about flat with the Hub compared to about minus 7 cents over the last couple weeks.
In the Rockies, prices fell hard Monday, with Kern River, Northwest and Cheyenne down more than 70 cents. Waha and San Juan locations, however, were flat, and California points were flat to down a penny or two.
"The market has been bouncing around day to day in California," said a California-based marketer. "Today demand seems to be down quite a bit. It was warm this weekend and the forecast shows it's going to stay warm for quite a few days. Some refineries are down for seasonal turnarounds. That's cut loads a bit. But the power plants are still running pretty steady. There's some more gas-fired generation out here and I think we will see some strong summer pricing. Everyone is waiting on the summer forecasts to come out. That will really set the market tone later this month."
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