The vagaries of spot gas pricing were in play again as some areas with colder forecasts for Wednesday, such as the Northeast, saw quotes record sizeable declines Tuesday, while numbers in still relatively moderate areas, such as the as the western end of the South (New Orleans and Houston), moved higher.

Whatever the various influences were having, nearly all points outside the Northeast were flat to up by less than a dime. Only a couple of non-Northeast locations joined the region in losses ranging from little more than a penny to about 60 cents.

Besides the bone-chilling cold lingering across Canada and much of the northern and eastern U.S., the cash market had ample backing from the previous day's rise of 24.5 cents by February futures. For much of Tuesday it appeared that next-day guidance was turning modestly negative, but Nymex's prompt-month contract managed to claw its way back up to a 1.9-cent gain by the close of business (see related story).

One source suggested that Northeast citygates may have fallen despite overall price firmness because their triple-digit spikes on Monday could have made them appear overbought in the eyes of some regional traders.

Cold weather constraints or otherwise low linepack-related restrictions were disappearing on some pipelines: PG&E, Northern Natural, Transwestern and Southwest Gas. Northern lifted System Overrun Limitations (SOL) in all market-area zones as it projected that Tuesday's average system temperature of 12 would rise to 19 Wednesday, above its norm of 15 at this time of year. But further projections of a drop to 11 Thursday and seven Friday hinted that the lack of SOLs might not last long, and sure enough a new SOL was issued for Thursday in Zone EF (see Transportation Notes).

Joe Bastardi, AccuWeather.com's chief long range forecaster, said this could turn out to be the coldest January for the nation as a whole since 1985. While there have been outstanding region-specific blasts of cold during January in recent years, Bastardi noted that coast-to-coast frigid conditions have not been experienced in the U.S. since the 1980s (see related story).

A Midcontinent producer considered it a toss-up on the market impact of the impending blast of severe cold almost everywhere. Some will increase their use of storage gas ("because there's still plenty of it") when the big freeze begins to envelop North America this weekend, he said, but others will be more cautious and buy new spot gas to preserve their storage accounts. For those reasons, he expects the frigid conditions to result in rising prices, but those who choose to use more storage instead will tend to prevent really major spikes in most cases.

Despite freezing overnight lows in Oklahoma, daytime peaks around 50 or so are keeping him and coworkers puzzled, the producer said. There's very little intrastate load right now, so after being one of the strongest-price Midcontinent pipes in late December, OGT is rather weak right now, he added. It still has plentiful gas in storage, and with local demand currently light, that means suppliers usually have to move gas from OGT into an interstate. In turn, you have to absorb the extra hit on your profit margin by paying OGT transport rates just to get your gas to a more lucratively priced pipe.

Strategic Energy & Economic Research's Ron Denhardt said he projects a storage withdrawal of 125 Bcf being reported for the week ending Dec. 31. Citi Futures Perspective analyst Tim Evans predicted identical 145 Bcf pulls for the weeks ending Dec. 31 and Jan. 7, to be followed by draws of 220 Bcf and 210 Bcf for the weeks ending Jan. 14 and 21.

Stephen Smith of Stephen Smith Energy Associates reported lowering his original estimate of a 145 Bcf pull in Thursday's report to 129 Bcf.

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