While the rest of the swing market began February flows atprices only moderately up or down from last-of-January levels innearly all cases, California numbers spiked in triple-digit amountsWednesday.

PG&E’s declaration of a systemwide low-linepack OFO fortoday was the obvious reason for PG&E citygates that hadstarted on either side of $12 to soar to more than $17 withinminutes. But for one source, it was also a basic supply/demandsituation: “They needed a lot more gas in California for heatingand power generation, so they had to pay up.”

The OFO had an indirect effect in pushing the SouthernCalifornia border up, a producer said (SoCal Gas did not issue anOFO). Any time the PG&E citygate gets more than 40 cents aboveborder pricing (reflecting approximate variable transportationcosts on the Baja path), then people will send more border gasnorth into PG&E territory, he said. Wednesday’s citygate/borderspread exceeded 50 cents. That meant buyers behind the SoCal Gassystem were getting more competition for border deliveries, theproducer said. He regretted selling border gas for less than $12early Wednesday morning, but saw “a little room” for Californiaprices to go even higher today.

The start of the February market was considerably more sedateoutside California. Flat Chicago citygates barely manage to stayabove $6, a marketer noted, but Northern Natural’s demarcation andVentura points shot up into the $6.10s as there was enough coldweather for the pipeline to declare an OFO for all market areazones.

Although California prices may remain strong today, as the aboveproducer thought, other markets are likely to tumble based on thescreen’s negative reaction to the storage report, a couple oftraders said. AGA said 128 Bcf got withdrawn last week. The Marchfutures contract, which had varied little from flat during themorning, took a decidedly bearish turn after the report andeventually fell 39 cents on the day during the regular tradingsession. And other than chilly conditions in the northern tier ofstates, weather fundamentals remain weak in the rest of the nation,the traders said.

Although few people were still doing February baseload businessWednesday, a buyer was rewarded for his patience by getting aTransco Zone 6 (NYC) deal in the $7.20s, about 50 cents less thanhis earlier purchases.

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