November spot prices moved higher (up 8-14 cents at most locations) Friday for weekend deliveries in response to the late run-up in Nymex futures on Thursday and the cooler temperatures expected through the weekend.

Temperatures already were down sharply Friday in many midwestern and eastern cities, with Atlanta dropping in the 40s and points farther north entering the 30s. Friday-night lows across most of the country were expected to be below 45 degrees, but a larger cold air mass was expected to dip down through most of the West by Sunday, dropping daytime highs into the 20s in Denver with snow expected.

Northeast prices for weekend gas posted some of the largest daily gains with most points up 12-15 cents, but at least one observer was not impressed. Spreads between the Gulf and the Northeast were getting wider, but still not wide enough, to cover variable costs on some pipes, he noted. “On Tetco you couldn’t cover the variable. Primary is maxed out on Transco. And at 9% the demand charge on Tennessee is so exorbitant that you need a spread of at least 53 cents to cover your variable cost. For each dime Nymex goes up, the variable goes up by another penny.”

Most sources attributed the market strength to Thursday’s futures increase, but Nymex was off on Friday so there was a little bit of a mixed message for the start of bidweek.

One source noted that December cash values seem to be helping pull up the November swing market. “December Tetco M3 basis right now is trading at plus 84, which equates to a price of about $5.10. With November prices trading mostly in the $4.70s, that leaves some room for either December to fall or November to rise. With November trading at such a discount, it makes sense for me to buy November, sell December and idle my transport.”

A Northeast LDC buyer said she did most of her purchases for the winter last bidweek and she expects that many others did the same, so there should be a light bidweek market. “We wanted to lock in prices with a creditworthy counterparty given the all the uncertainty about prices and the risks,” she said.

One source said he was pretty bullish on Gulf Coast bidweek prices because of the colder weather and the withdrawals EIA reported in the Production Area (-9 Bcf), which already has a 58 Bcf deficit compared to levels last year (EIA reported a 1 Bcf withdrawal for the entire country last week). “The deficit in the East is at 71 Bcf, up from 65 Bcf last week despite the 5 Bcf injection. There’s quite a bit of gas coming out of storage down here even though there’s not a lot of load, which could say something about production,” he said. “But a lot will depend on how people forecast the weather for the month.”

Prices at locations along the Gulf Coast of Texas remained unusually weak compared to Louisiana points on Friday. Ship Channel prices still rise and fall with the Nymex, but basis has been much wider than average, noted one regional trader. Over the past week, Katy and the Ship Channel have been trading within a penny of one another, but there has been a 15-18 cent spread between the Ship Channel and the Hub. “Ship normally is below the Hub this time of the year but not by this much. These spreads have been as wide as I’ve seen since 1996 when we had the big 90-cent blowouts,” he said. “We have mild weather in Texas and the whole West and cold weather in Chicago and the Northeast, which is keeping Henry real strong relative to the Ship Channel and Waha and other Texas points,” he added.

He predicted December basis at the Ship Channel would end up at minus 10-15. January basis currently is minus 8.75-9.5 “and those are big numbers.” He quoted a Northeast basis at Transco Zone 6 New York at plus $1.02.

Waha and Midcontinent spot prices were strong for weekend flows because of the cold weather forecast, the Nymex run Thursday and El Paso maintenance, which forced the pipeline to warn shippers about possible overpull alerts over the weekend. “All the gas right now coming out of the San Juan Basin on El Paso has to go north into the Midcontinent and onto Northern because it can’t get to Waha,” said a marketer, noting that San Juan prices were hammered on Friday, down as much as 18 cents. “Blanco was $3.17-24 for the weekend. El Paso put out a pretty strong statement to the users on the system that there would be no overpulls allowed and no gas borrowing. They are watching things pretty tight and said they would be capping points if they try to overpull.”

“The San Juan got crushed and the Rockies got slightly beaten up,” said another observer. “Part of that is maintenance on El Paso that has about 400 MMcf/d backed up into the San Juan. The other part is the warm weather in California and the Rockies. The fall in weekend prices in the Rockies was limited by the cold weather due to arrive on Sunday and especially Monday. Forecasts are calling for snow in Denver on Monday and perhaps Sunday as well.” He said Bondad was trading at Blanco minus 8 for December and “that is a lot narrower than a few months ago. Over the summer that differential was as wide as a dollar.”

El Paso sent out a notice to shippers Friday that its multiple projects scheduled would severely hinder its ability to transfer San Juan gas supplies from the north mainline system to the south mainline system. The projects include Line 1102 work scheduled Nov. 23-24 between Plains and Eunice stations and Line 1203 (Maricopa crossover) work scheduled Friday through Dec. 2. “These projects combined with Williams C, which is not expected to return to service until Nov. 24, may cause a low line pack situation if deliveries to customers exceed scheduled quantities, ” El Paso said. “El Paso will not have the flexibility to offer paybacks or allow over-pulls during this maintenance period. Markets will not be kept whole. Limits or ‘caps’ may be placed on receipt points for non-performance as required.”

“There’s really not much demand on the system anyway,” a trader said. “If there were, they would be in a world of hurt and you really would have seen Waha prices shoot up because that’s where everyone would have to buy their gas.”

He said Waha prices started at $3.99 on Friday but traded as high as $4.10-11. Permian started around $3.90 and traded up to $4. “The cold could reach down to the Panhandle region by Sunday. It’s nothing much, but they should see some below normal temperatures.”

“There’s nothing going on in California,” said another Southwest region player. “It’s dead. It’s trading around index for next month. We sold PG&E Topock at $3.80. There’s very little gas going to the border. Weather is just too nice in the West.”

He added that Waha December basis has been floating between minus 19 and 21. Some deals have been trading index minus 4-5.5 cents, and fixed prices were coming in Friday at $4.04, flat with November. “Waha has been trading at index-minus for more than a year. Part of the problem is that people have been holding a lot of gas and have to unload some of their baseload gas each month. The liquidity is bad so it’s hard to get any transactions done. In order to try to get someone to buy, you have to go to index minus 4-5.”

Despite the cold front, weather in western Canada and the Pacific region remained balmy on Friday. “Calgary temperatures have been setting record highs,” said a producer. “It’s just unheard of that temperatures are this warm; it’s 15 (degrees Celsius) above. The West is warm and the East is cold and that’s what they are forecasting for December — after this little bit of cooler weather passes through the U.S. The current cold front is supposed to disappear. They have been talking about the cold showing up, but at some point it actually has to get real cold and cash has to strengthen because of that.”

In the warm Pacific Northwest, Sumas hovered around minus 30 for December. Malin was minus 23 and PG&E Citygate was about minus 16. “Day markets in the West are just so weak; there’s a definite disconnect between the East and West right now. Everyone was expecting it to get colder but we certainly didn’t see much buying for the weekend. Sumas was $3.64-65, up a little on the Nymex run but it didn’t move much. We’re still not seeing any load. There’s a lot of gas in Jackson Prairie and Mist storage that they can pull on before they really have to go out into the spot market and buy anything.

“Bidweek probably will be weak with very little business being done. It’s just the nature of the market right now,” he lamented. “Liquidity is not there. I’m not putting on any new positions for next month. We’re just rolling over stuff. I’ll trade the day market; that’s the only place to make money now. You can’t go out in the terms business right now. You run out of liquidity with trading partners. You have a short list and it’s not going to get better anytime soon. I don’t know how this industry is going to fix itself.”

December basis at Dawn was trading at plus 17, down a nickle from last month, while Chicago basis was sitting around plus 7-8. Chicago traded between $4.31-37 on Friday for weekend flows, an increase compared to recent spreads with the Henry Hub, which was in the low $4.30s Friday. Chicago has tended to trade at a 2-3-cent discount to Henry lately, but held firm Friday on the forecasts for colder weather over the weekend and next week.

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