Despite expectations of continued softness following Tuesday’s all-around price plunges, most points found themselves in rally mode Wednesday. With a few scattered small drops thrown into the mix, the majority of the cash market ranged from flat to up nearly 40 cents, with gains in the teens being most common. Tennessee Zone 6 was a standout with an uptick of more than 80 cents.

With much of the East either already getting or about to get a break from the past two weeks of wintry siege, several sources were surprised to see Wednesday’s general bullishness. A couple suggested that perhaps a lot of traders were having second thoughts about continuing to get shorter prior to what is expected to be a very large (possibly record-setting) withdrawal of well over 200 Bcf in EIA’s weekly storage report Thursday morning.

There were other factors at work, though. Cash numbers got a bit of support from the expiration-day screen’s strong gain of more than 20 cents. In addition, the March futures contracts in crude oil and heating oil also soared following a report of a major decline in U.S. stocks of heating oil and gasoline. Oil markets also remain tense as the prospect of war with Iraq seemed even more imminent after President Bush’s State of the Union address Tuesday night, and recent hopes of Venezuela ending the lengthy strike that is crippling its oil exports stay unfulfilled. Crude rose nearly a dollar to $33.63/bbl.

And just because a long spell of arctic chill is lifting a bit doesn’t mean heating load has disappeared, a Northeast utility buyer said. At lunchtime Wednesday, area temperatures were still slightly below freezing and snow was falling, she added. “We’re not as cold as we had been, but it’s still pretty cold,” the buyer said. A restriction remains in place at Algonquin’s Stony Point (NY) Station, she said, and that helped keep downstream New England citygates strong.

“Cash got strong in anticipation for a big withdrawal [figure] Thursday,” according to a marketer. Most people get their daily deals done early, so the Nymex movement doesn’t usually affect cash averages much, he said. He looks for the screen to “come off in a big way if the storage report comes out below 200 Bcf. If the bears don’t get it tomorrow [Thursday], I’m guessing they will come out Friday. This weekend is supposed to have above average temperatures in the Northeast.”

The marketer wasn’t the only one thinking the current rally is likely to be short-lived. “Gas prices cannot continue to go much higher unless power prices move in lockstep,” another trader reasoned. Though power prices generally are rising, he noted that they are not moving enough to keep pace with gas numbers.

Transco continues to carry its price premiums over Texas Eastern, the trader went on. “There are just some markets that require that you have Transco gas,” he explained. For example, to get supplies to Washington Gas Light, you essentially need Transco Zone 6 non-NYC transport, he said. Temperatures are expected to moderate into the 40s for the Mid-Atlantic “and we see prices going lower again. However, we think they will only fall so low as our internal meteorologist sees temperatures right back down to eight to 12 degrees below normal by the middle of next week.

A Midcontinent marketer didn’t see Northern Natural’s ending of a market-area System Overrun Limitation (see Transportation Notes) as having a lot of effect on demarcation and Ventura markets because of fairly tight price ranges, but did concede that having the OFO-like restriction lifted probably helped explain why the two points were among the rare ones registering small declines.

One trader reported a bidweek Panhandle Eastern deal at basis of minus 36 cents and said he saw it being bid at minus 45 cents Wednesday. That’s extremely weak compared to past Panhandle basis that often ran in the minus teens, he added. However, index deals are tightening, the trader said. Panhandle previously was being offered as weak as index minus 6.5 cents, but he saw one deal done at index plus 0.5 cents Wednesday.

A marketer said the Chicago baseload market for February was much less active Wednesday than Tuesday. “It seemed like [Wednesday] there were a lot of people short Chicago, and they were not finding any offers,” he continued.

A Texas-based producer reported being aware of “quite a lot” of February business getting done a couple of weeks ago. “People that sold gas then must be regretting it because prices are considerably higher now,” he said.

A power producer said Texas Eastern basis was moving up all week in nickel increments, quoting it at plus 125/130/135 cents “and now trading at [plus] 140 cents.” He also reported strong basis of plus 220 cents for Transco Zone 6-NYC and plus 250 cents at the Algonquin citygate. Transco Zone 6-non NYC has a bid-ask spread of plus 185-220 cents, he said.

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