Although the return of wintry weather to much of the Midwest, Northeast and Mid-Atlantic was not as severe as the blizzard-beset period in January and the first half of February, and was already due to start moderating as soon as Wednesday, it was enough to generate price gains almost across the board Tuesday.
Upticks ranged from 2-3 cents to the mid $9.50s area. Conditions are due to rise as much as 10 degrees or so Wednesday in the Northeast, but multi-dollar spikes were recorded at several citygates in the region, topped by Iroquois Zone 2. Somewhat curiously, Texas Eastern M-3 and the non-New York pool of Transco's Zone 6 saw sizeable increases in the range of 65-80 cents but failed to join the triple-digit gainers.
Outside the Northeast prices rose by considerably more subdued amounts, limited to a little more than 15 cents. The smallest increases tended to be concentrated in the Gulf Coast as the weather outlook in the South remains dominated by moderate to merely chilly temperatures. A few flat to down about a nickle locations were exceptions to the overall advance.
What The Weather Channel (TWC) called "an increasingly cold windy storm" is targeting the Northwest for midweek, which helped to boost prices in the Pacific Northwest/Rockies and across the West in general. There will be plenty of snow, TWC said, although it will mostly be in the mountain areas.
The March futures rise of 1.5 cents and the return of industrial load from a long holiday weekend gave the cash market a little extra support. It won't be so Wednesday, however, after the prompt-month Nymex contract retreated just shy of a penny while begging its three-day countdown to expiration (see related story).
No injuries were reported from a TransCanada line break Saturday night in rural northern Ontario. It was the fourth major gas pipeline blast since early last September (see Transportation Notes; related story).
It's unlikely that the line break will have any significant market impact, said James Crandell, commodities research analyst with Barclays Capital in New York City. This is because capacity on the Canadian Mainline is woefully undersubscribed due to the low price of gas in recent years and the overall economics of moving it from Western Canada to markets as far away as Eastern Canada and the U.S. Midwest and Northeast. TransCanada spokesman James Millar confirmed that the mainline has capacity of 7 Bcf/d but only averaged about 3.4 Bcf of throughput last year.
Noting that the March futures market took the TransCanada event in stride by finishing almost unchanged, Tim Evans of Citi Futures Perspective said it's rare for a rupture to cause major price disruptions because of the typical "redundancy" of pipes through an area, as was the TransCanada case with three lines traversing the affected area. Also, in most large market areas other pipelines can take up the slack if a constraint occurs on one, he said.
Several of the major pipelines serving the Northeast, including Tennessee, Texas Eastern and Algonquin, were barring negative imbalances and encouraging shippers to run positive imbalances temporarily in the market area.
A couple of sources thought at least a good part of Tuesday's big gains in the Northeast was due to those pipeline constraints, and also to quite a few traders having underestimated their needs for late in the holiday weekend buying extra gas for imbalance and loan service paybacks.
A Texas marketer had some doubt about the analysts' expectations of little to no price impact from the TransCanada rupture. He granted that only about half of the pipeline's total capacity is being used, but he observed that for that reason a lot of shippers are under IT rate schedules, which means that TransCanada's currently not allowing any "discretionary services" through the rupture area likely is reducing how much gas those shippers can move to eastern markets. He saw it as having a fairly dramatic effect on the New England market Tuesday, with TransCanada-fed Iroquois Zone 2 seeing the biggest spike of the day.
Still, the marketer said he still couldn't help but be surprised at how much overall prices had written, especially with the cold weather not expected to last very long.
The official start of bidweek may have been a bit slower than usual due to many traders returning from three-day or even four-day weekends. March prices seemed to be getting stronger, the marketer said. For instance, he added, Tennessee Line 200 in the Northeast traded at physical basis around plus 80 cents late last week, but basis got above a dollar Tuesday -- likely in relation to the region's daily market spikes -- before starting to come back down.
The National Weather Service (NWS) predicts below-normal temperatures during the first seven days of March throughout the U.S. except in the southern tier of states. Only the lower ends of Georgia, Alabama and Mississippi will avoid the below-normal conditions, NWS said. It looks for above-normal readings in that period only in West and South Texas and in the southern end of Florida's peninsula.
The Baker Hughes Rotary Rig Count reported a fall of one to 905 in the number of drilling rigs targeting natural gas in the U.S. during the week ending Feb. 18. The deactivation of one rig occurred in the Gulf of Mexico, while the onshore count was unchanged at 886, Baker Hughes said. Its latest tally is flat from a month ago and up 1% from the year-earlier level.
Stephen Smith of Stephen Smith Energy Associates projects an 80 Bcf storage draw for the week ending Feb. 18, which he said is down from an earlier estimate of 85 Bcf.
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