Feeding off of the current arctic chill and prior-day support from near-month natural gas futures, natural gas cash point price averages continued their ascent on Tuesday, albeit in smaller increments than seen on Monday.

While more than 20 averages across the country gained more than $1 in value on Monday, Tuesday’s cash trading saw zero. Rockies and western points led the gains Tuesday with most points recording 20- to 40-cent additions, while El Paso Bondad added 60 cents on the day. The second consecutive day of gains at Rockies points is significant because the region has been plagued by weakness as of late. Increases in the Northeast, Midcontinent and Gulf Coast were wide, ranging from just less than a dime to a little more than a half-dollar. As the balancing point for many within the industry, the Henry Hub tacked on 19 cents to average $7.74.

Of special concern was Florida, which is seeing some significant colder-than-normal readings. Despite the chill, Florida Gas Transmission citygate only mustered a 16-cent gain to average $7.20. AccuWeather.com meteorologist John Kocet said Tuesday night would be a “very cold night” for the Southeast, with temperatures in the 20s from Florida through the Carolinas and back into Tennessee. He noted that the arctic air mass producing this current bout of cold weather is about three weeks ahead of schedule.

The arrival of more winter-like weather in the eastern half of the United States has sparked heating demand and the attention of traders. Even with nearly 3.5 Tcf of gas in storage, traders know a good cold winter can reduce supplies rapidly. Going into Wednesday’s trade, the cash market won’t gain momentum in either direction from Tuesday’s futures session, which saw the December contract close at $6.516, down 1.7 cents from Monday.

“Cash prices were strong early on Tuesday, but then they came off in the end a bit. Monday was the opposite because we started low, then moved higher,” said a Midcontinent trader. “Basically, I get the sense that people don’t want to switch things around too much due to capacity concerns. A lot of the arbitrage opportunities that existed a few weeks ago are now gone because people don’t want to risk losing their space on the pipe. That is why we are not seeing a lot of yo-yoing in the Midcontinent. There is a surplus of gas out there.

“The pipes remain pretty full, which causes problems especially as storage withdrawal season sets in,” he added. “The more gas people withdrawal, capacity on pipes will become an even larger issue. Trying to get gas from point A to point B will become all the more difficult. We are just trying to stay out of trouble because if the gas doesn’t flow, then you have to go to plan B or plan C. We are trying to keep it very simple out there. We are selling to people who have credit. In this current market banks are certainly a problem, so we are trying to stay away from some of the bank-owned gas marketing companies. That also contributes to an illiquid situation. There are a lot more things in play than just supply and demand.”

The trader noted that it “seems like there is lackluster demand out there right now,” but that some of the recent producer cutbacks will likely change all of that. In the past month a who’s who of the domestic gas industry has announced budget cutbacks, including Chesapeake Energy Corp. (see Daily GPI, Nov. 3; Sept. 24), Petrohawk Energy Corp. (see Daily GPI, Oct. 2), Penn Virginia Corp. (see Daily GPI, Oct. 6), SandRidge Energy, Quicksilver Resources Inc., Equitable Resources, Denbury Resources and ATP Oil & Gas Corp. (see Daily GPI, Oct. 9).

“The scaling back of production by producers will likely help prices rebound, but these things take time,” the trader said. “It will take a while for that signal to make it through to the market. It is a balancing game and no one wants to step out and risk their neck.”

Looking at the weather picture, it appears another cold snap is right around the corner to replace the current one. “Arctic air in place over the eastern third of the country tonight will result in a widespread hard freeze in the Deep South,” according to AccuWeather.com. “Another reinforcing shot of cold will arrive by the weekend.”

According to AccuWeather.com meteorologist Justin Povick, another shot of arctic air later this week will dive southeast from western Canada into the northern Plains after only a brief reprieve from the extreme cold. “Unlike the last shot of cold air, the core of this air mass will move more to the east, rather than dive south into the Midwest,” he said. “The cold will follow another Alberta Clipper, which will track towards the Great lakes by late Wednesday and into the Northeast on Thursday. The clipper will produce blustery conditions and a mix of snow flurries, showers and lake-effect snow squalls. Behind the clipper, high temperatures on Thursday and Friday will be 10 and 20 degrees below normal for mid-November.”

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