The first week of 2006 came to a close with the cash market continuing to display more resilience than would seem to be warranted in a period of unusually mild weather and following a storage report that shocked many by estimating a highly unusual small injection for the end of December and sent the screen to its third big loss in a row.

Most points fell from a couple of pennies to about half a dollar Friday, but outside of Northeast citygates the declines were fairly modest in a majority of cases. There were also scattered instances of flat to moderately higher prices in which gains ran as high as about 20 cents. End-of-week activity was pretty quiet, according to one source who called it “a TGIF market.”

The market appeared to largely shrug off the Energy Information Administration’s report Thursday of a 1 Bcf injection for the week ending Dec. 30, which drew many cries of incredulity (along with rumors of a possible revision that went unfulfilled) and sent February futures plunging by nearly 70 cents. Friday’s general softness was anticipated, but many of the losses were considerably smaller than expected.

Although temperatures above seasonal norms would continue to dominate most market areas into the weekend, snow and freezing conditions were expected in parts of the Pacific Northwest, Midwest and upper Northeast. Even the South east of the Mississippi River could expect freezing morning lows until a warm-up was due to begin early Sunday, The Weather Channel said.

PG&E’s declaration of a high-inventory OFO for Saturday (see Transportation Notes) had limited impact on western prices in general and particularly at Malin and the PG&E citygate, which were flat and down about 3 cents respectively. Instead, the OFO seemed to influence San Juan Basin and Kern River numbers in the production area more heavily, as both points fell about 15 cents. However, Kern River’s return to normal linepack levels after a lengthy period of high linepack was slightly bullish.

A producer who trades the Northeast detected a not-highly-visible factor in Thursday’s overall rally and Friday’s modest amount of softness. He reported seeing some gas-favorable fuel switching going on in his market area last week now that natural gas is priced competitively below No. 2 and No. 4 oil and low-sulfur (0.5%) resid. After all, gas prices have been getting weaker for some time while crude oil and related products have remained relatively strong, he pointed out.

Also, the producer said, the Northeast was predicted to get cooler during the weekend, with Saturday likely to be its coldest day of the week. Besides, cash prices couldn’t drop forever, he added, saying, “The market wasn’t going to puke up a dollar every day.” He dismissed the screen’s 13.3-cent rebound as purely based on technical factors, which Nymex traders confirmed by crediting the gain to short-covering (see futures story).

A Midwestern marketer said temperatures had dropped into the upper 20s in her region, so obviously there was at least a little heating load for gas. She reported mid-$9.20s pricing at the Consumers Energy citygate, saying she had been paying less than $10 for delivered gas in Michigan since late December.

Tropical Storm Zeta still hadn’t totally given up the ghost Friday, a week after its formation, although it had been downgraded to a tropical depression. But the end of the record-breaking 2005 Atlantic hurricane season was near, according to the National Hurricane Center, which said Zeta was rapidly weakening and that it would issue no further advisories on the storm.

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