While futures slipped a few cents Wednesday, cash prices managed gains of 5-20 cents mainly on the continuing wide gap between current cash and November futures and the cool temperatures and slightly stronger demand in the Midwest and Northeast market areas.

A leak on Texas Eastern’s 24-inch diameter mainline in Indiana Tuesday, forced the company to stop accepting receipts, but Tetco was able to maintain deliveries, according to a pipeline spokeswoman. Marketers and traders reported no impact on prices. Although the line carries about 300 MMcf/d, Tetco was able to reroute gas off its other mainline at West Louisiana (see Transportation Notes and related story).

Most pipelines are chuck full of gas right now. The market is busy pumping as much into storage as possible because of the economic incentives, but with storage rising rapidly, storage field pressures will force a gradual decline in injections. Several pipelines, including Texas Eastern and Transco, already have asked shippers to get their receipts and deliveries in balance because of high system linepack.

Transco told shippers to get in balance Wednesday because its storage is more than 80% full, the pipeline is packed and market area demand is limited (see Transportation Notes). Shippers must reduce their cumulative month to date imbalances to no greater than 5%, or 1,000 Dth, whichever is greater, before Sunday and continuing thereafter until further notice. Transco warned that it might have to issue an operational flow order if the situation isn’t corrected over the weekend.

The abundance of gas in the pipeline grid obviously hasn’t had the expected impact on prices, however. Transco Station 65 rose more than a nickel Wednesday. Most other Gulf points were up 5-10 cents. Northeastern locations added as much as 15 cents.

“The market was up today, and depending on what the weather is — it looks like it may be cool in the Midwest and Northeast for the next few days — the price may not come off for the weekend like it normally does,” said a Northeast marketer. “Nymex and the cooler weather are keeping prices up, but there really aren’t many other fundamental reasons for the market strength.

“Really I don’t think there’s that much heating demand yet in the Northeast. There’s some incremental load, and we are seeing some demand from gas-fired power generators. There also is a wide basis to the hub. I think the market went short basis into the month, so you’re seeing some short covering and some park and loan activity going on, storage buying stuff. I think the producing area was held back a little today by the Nymex falling as it did.”

The Henry hub started out around $4.85 and went up to the mid $4.90s. But ranges were tighter Wednesday. Basis to November futures also tightened up a little. Basis spreads to New York remained flat at about 45 cents.

Midwest sources reported some incremental loads Wednesday because of continued cool weather with lows expected in the high 30s Wednesday night. “There was some more demand at the market gates and hubs,” said a marketer. “I also saw some spreads on transport work a little better than they have the last few days. It’s a little bit more demand than we’ve seen, but that probably will come off if it warms up.

“I frankly was surprised to see another increase in prices,” he said. “We probably will see a pretty big injection tomorrow, probably around 80 Bcf.”

He noted that working gas levels in storage are expected to rise above the five-year average for the first time this year, which should be a bearish indicator for the market.

The Energy Information Administration (EIA) reported 75 Bcf injection in last week’s report for the week ending Oct. 3, bringing working gas storage to 2,863 Bcf. Market observers are expecting this week’s injection to be 50-95 Bcf with most experts looking for 70-85 Bcf.

Analysts at Global Insight said, “Barring extreme weather, inventories should reach levels considered at least minimally adequate for the winter. Weekly injections of just 34 Bcf are needed in the next four weeks to reach 3,000 Bcf. We believe storage may even reach 3,100 Bcf by the end of October. A relatively benign temperatures forecast for most regions should permit storage injections of 75 Bcf for the week ending Oct. 17.”

Tim Evans, futures analyst with IFR Pegasus, said he’s looking for 75-85 Bcf. “While this development [would give] the market a more normal cushion against winter shortfall, we think the fundamental implications are actually more bearish than that alone suggests,” he said in a note to clients. “The bearish storage trend since May will not shut off the moment storage hits the average. On the contrary, the surplus driving the storage trend will continue, extending the injection season a week or two later and dampening the withdrawal rate for any given weather pattern. With the short covering largely out of the way, it’s going to be difficult to find the fundamentals to extend the recent rally.”

Another bearish factor, according to the Midwest source, is the more than adequate planning by utilities that he’s seen heading into this winter. “A lot of people have all of their winter gas bought already,” he said. “They have swing gas lined up. The RFPs look different this year than what we’ve seen in the past. There’s just a lot more covering of the daily demand than we’ve seen before. There are some of the usual baseload purchases, but they don’t appear to be taking as much risk this winter.”

He’s not ready to say prices will crash come Nov. 1, however. “Unless we have an abnormally warm winter and everyone is choking on gas in the Northeast and Midwest, I don’t expect to see $2 prices. I actually think prices will stay up because no one will be running to storage to start pulling gas out if it gets cold. They will keep buying in the day market to preserve their storage and to use their transport. That may all change when we see what kind of extended weather we’re going to have.”

The National Weather Service is calling for above normal temperatures west of a line from West Texas to Washington state, but it said there are equal chances that the rest of the country will be colder or warmer than normal.

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