Just when many people thought it was safe to say goodbye to winter, frigid temperatures once again occupied a large swath of high natural gas-demand regions, putting upward pressure on cash prices in a number of areas around the United States. For a second day in a row, Transco Zone 6 NY on Tuesday saw a high of $20 while averaging more than $17.50, an increase of more than $5/MMBtu from Monday's average. Most other Northeast points also saw gains
After weathering a solid month-and-a-half of colder-than-normal temperatures, traders thought last week's warm-up in the Mid-Atlantic and Northeast signaled the end of the piercing cold for the season. However, this week's chill, which could feature snow along the coast Wednesday, changed that perception.
According to the National Weather Service, temperatures on Tuesday were 0-20 degrees Fahrenheit from the Northeast through the Great Lakes and into the Northern Plains. Temperatures in the Mid-Atlantic weren't much higher, with readings for a large portion of the region in the 30s and low-40s.
Most cash points in the Midcontinent and Gulf Coast regions also rose Tuesday. Chicago Citygate was up about a dime to the mid $7.40s and Henry Hub rose a little more than 20 cents to the mid $7.50s. West Coast points also posted across-the-board modest gains. The SoCal Border average climbed nearly a dime more than Monday's average to the high $6.80s.
"Chicago went up about a dime today but lost a little ground relative to Henry Hub," said a Canadian producer. "Temperatures are expected to climb throughout the rest of the week. So we are probably looking at some falling demand and lower prices, particularly by the weekend."
He noted that Alliance raised its authorized overrun volumes to 15% for Wednesday from 10% for Tuesday, so there was a little more space to move supply into Chicago. "We've had no problems delivering all of our gas," he added. "We were trading upstream in Alberta Tuesday, which was a little weaker. It's mild in Calgary but still pretty cold in the northern part of the province. I think it won't be long before that breaks down and gets milder."
The Canadian producer noted that the Northeast is experiencing some of the coldest temperatures relative to normal yet this season. "Demand remains strong there, up more than 30% in the region from first-of-the-month levels. But a warming trend will hit by weekend." He also noted that while last week's U.S. storage withdrawal might have been below 100 Bcf, next week's report could jump back above 100 Bcf for the week that ends Friday because of this week's cold.
Another Canadian producer said that while prices still looked firm on Tuesday, demand levels were still in question. "Prices were pretty firm Tuesday morning," the producer said. "Despite the cold, it really didn't seem like there was a ton of demand out there. Besides the Vector issue, pipes are flowing well," he added, referring to limited takeaway capacity from the Chicago area due to oil and condensate clogging Vector Pipeline filters going into Dawn Hub (see Transportation Notes).
"It is obvious that weather has firmed up prices over the last couple of days," he added. "We saw them a little bit stronger on Monday and then Tuesday produced even more strength. Midcontinent prices definitely firmed up a little bit."
A Midcontinent region utility buyer said that while things were somewhat chilly currently, he sees a break coming in the near-term. "We bought a little gas today but it's slowly warming back up," he said. "[Tuesday and Wednesday] will be a little cool in the Plains states but they are talking 60s next week so we won't be buying anything by then. We've been doing some nice draws from storage and will continue to bring it down. We hope to completely deplete storage by the end of the heating season so we can go into the injection season fresh."
The utility buyer added that prices were near flat in the $7.20s and low teens at Northern Demarc. "A lot of people have been pulling gas out of storage," he said. "We were seeing some cuts on Northern and that was affecting our supply. It was a little hassle we had to deal with. Demarc and Ventura have been running pretty even over the last few days. I assume that's because demand has been propping up Demarc. Ventura normally holds a premium."
A Northeast utility buyer said prices up in Niagara have been relatively firm recently. "Because of some capacity situations, there is big difference between interruptible and firm deals in Niagara," he said. "We bought interruptible gas at $8.750 and $8.310 on Tuesday, so there is a pretty good range. On Monday, we bought at $7.810, which was pretty inexpensive."
He added that down in the production area on Tennessee 500 in Louisiana, he bought at $7.600, a dime higher than on Monday. "While the Northeast is feeling the pinch of the recent cold, it appears that the production area hasn't seen the affect yet," he said. "While their stuff comes up into the Northeast, maybe the demand down there is not that strong due to milder temperatures."
Addressing the storage picture in the Northeast, the utility buyer said that while storage was "a lot fuller" before the cold hit in mid-January, storage levels "are still fine" in the region.
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