The cash market pushed on to new heights in most cases Tuesday, spurred by Nymex matching its all-time open outcry record high of $10.10 — if only fleetingly — and continuing winter weather across most of the U.S. and Canada that was penetrating even farther south to Houston and South Texas. It appeared that a growing near-panic over the adequacy of storage inventories was the primary driving force behind the move higher that brought some new point-specific price records.

Some say Tuesday’s trading may represent the apex of this week’s outbreak of extreme bullishness. After hurdling the $10 mark for only the second time in its history, the screen later retreated and was up just a little over a quarter to $9.40 at mid-afternoon. And although it eventually ended the day up 44 cents to $9.577, the out months were dropping sharply. Nymex’s crude oil and heating oil contracts also registered significant declines.

In addition, the Midwest could expect a moderating trend to begin Wednesday and continue through the weekend. And though the Northeast and Mid-Atlantic were due for a little more severe cold, they also were likely to see at least a bit of relief toward the weekend.

Some production-area points had recorded their all-time highs Monday, but those were being shattered by new records Tuesday. For example, Trunkline East Louisiana topped out at $24 Tuesday; before this week it had previously peaked at $10.80 in Dec. 11, 2000 trading. And ANR Southwest, which had seen a high end of $12 on the Dec. 21, 2000 trade date, was quoted as high as $22 Tuesday. Other points, although stratospherically high, were still far short of their records (an example being Transco Zone 6-NYC’s high of $37 Tuesday, which compares with the Dec. 29, 2000 trade date when it commanded a range of $24-50 and its WACOG of $37.85 surpassed Tuesday’s peak).

The West, being less severely impacted by winter’s current blast, tended to record most of the sub-dollar gains and even had Western Canada/Pacific Northwest markets such as intra-Alberta, Westcoast Station 2, Sumas and Stanfield flat to lower. But El Paso-Permian and Waha broke out of the relatively weaker western mold with gains of $8-12 that included high ends of $24 and $28 respectively. They continued to receive solid support from demand in the intrastate Texas and Midcontinent/Midwest markets.

A series of new constraints and/or cautionary warnings by pipelines, especially those to the Northeast, illustrated the grave concerns about storage. Transco said it might have to implement only its second OFO ever and the first to deal with linepack shortfalls (see Transportation Notes). Transco did issue an Imbalance OFO on Dec. 1, 2001, according to a spokesman, but it wasn’t a “traditional” OFO; shippers were packing the pipeline at that time and the OFO required them to increase their market takes or reduce supply receipts. On storage, he added, “We’re not in a panic mode, but are concerned. The levels are low, and we need to get the situation resolved. I was told that every other pipe that goes to the Northeast already has flow restrictions in place.”

Looking a little further out, Texas Eastern said a storage-related OFO will become effective March 1. This was in addition to ongoing restrictions already in place. The pipeline said that based on current operating conditions, its total storage withdrawal capability would decline within five days to less than its total daily contracted firm storage withdrawal rights.

While Columbia Gas Transmission has been able to maintain service to its firm customers, “it’s very tight,” a spokesman said. He labeled it the worst winter since 1977-78 for gas supplies because the colder than normal periods have been so prolonged. “Usually we get a few days’ break, some above normal temperatures, but this year it’s just been cold spell after cold spell,” said Columbia’s Kelly Merritt. Queried as to whether the situation in 2000 was as bad, he replied “not even close.”

But Merritt emphasized that while Columbia has cut interruptible service all across its system, it is working with firm service customers and maintaining deliveries. He acknowledged “we can’t get as much out of storage toward the end of the winter. We don’t have as much deliverability as we did two weeks ago.” Last week Columbia issued a notice to its firm customers to use all their firm transportation before drawing on their storage gas; “in other words, we’re asking them to get as much gas as they can into the system.”

“With storage so low, pipelines are now in the drivers’ seat,” said a Northeast marketer. “The big question is what happens when market area storage is cut. With primary firm needed to flow gas to the market area right now, how will people keep themselves whole if and when storage is cut? I have asked some of my LDC customers this very question and have yet to receive a good answer.

“That being said, let’s do the math on just how bad the storage situation is. We have 1.1 Tcf right now and will get approximately a 175 Bcf withdrawal Thursday. With the cold temperatures this week, next week’s report could be a 200 Bcf draw. That will effectively leave us with 800 Bcf with four weeks left in the withdrawal season. We will be pulling from pad [cushion] gas before long. But even if we get through this winter, the storage issue will continue. Starting from 600 Bcf, we will have a long way to go to get back up anywhere near 3.2 Tcf. Even if we can inject 1.8 Tcf this summer, we will still only be at 2.4 Tcf, which is 25% below full capacity. With production down anywhere between 5% and 10%, gas is not coming easy.”

A Northeast utility obviously was utilizing its firm transportation to the max. Usually it quotes a mix of production area and citygate deals, but Tuesday it offered only Gulf Coast numbers in the $15-17 range, as opposed to Transco Zone 6 and Texas Eastern M-3 numbers averaging in the vicinity of $25.

“We just couldn’t keep up with the rest of the market in the Pacific Northwest,” said a marketer referring to the regional softness. “After all, it’s 50 degrees in Seattle and Portland, and storage is not that much of issue here,” at least not to the extent back east. He noted that even Northwest Pipeline was relenting a bit on Jackson Prairie withdrawals Tuesday.

A Midwest marketer recalled previous high-priced markets “when people would go short on one Chicago-area utility with $20 penalties in order to sell to another with $40 penalties. Nicor [still known as NI-Gas at the time] had the lower penalties then, but they’ve been evened out since 1996.”

“I’m swamped and I can’t even tell when I’ll be done for the day,” commented a harried-sounding Midcontinent trader. He added, “I just can’t work up much sympathy for the Northeast when gas is going for nearly 20 bucks in the Midcontinent.”

A Southwest trader offered this commentary: “Swing trading is getting over with quickly, but [March] monthly deals are starting to heat up. I’m without a position and haven’t traded anything yet. I’m on the outside looking in. It feels kind of nice being flat and having the option of staying out if I choose. Right now I’m not sure if there is a subtle way to jump in, and I would rather not make a big splash.

” I keep thinking prices are going to come down, but it looks bullish for the next week or more. I feel bad for those having to engage in panic buying. I have been there. It is a great way to get that ulcer you always wanted.”

The trader saw little bidweek action Monday, saying it more or less started Tuesday. “Wednesday will also be a big day, then I think volume will start to taper off for the rest of the week. Utilities are still buying what they need. Not too many options there. How could you explain paying $40 if your friend bought it for $20? I’m not saying we’re going to see $40 gas, but Texas has icy weather, and there are production problems all over. Better put on another sweater.”

Due to the hectic swing market Monday and Tuesday, many traders were willing to let bidweek business slide for the time being. But a western trader reported doing a Malin deal for March at $8.40 Tuesday.

A marketer said he was sitting tight so far in March trading, adding that credit issues with counterparties still hamper his flexibility. He also noted that “a lot of Midwest utilities” were fretting about stretching their storage through March.

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