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Colder Weather Generates Moderate Price Upticks
A moderate advance in weather load got a market response of equally moderate price increases Wednesday. With quite a few points registering close to flat again, a preponderance of the gains were 7 cents or less.
Transco Zone 6-NYC and Algonquin citygate saw small losses, while other Northeast citygates ranged from essentially flat to 3 cents higher. Their relative lack of strength was attributable to traders’ knowledge that Sable Island production and Maritimes & Northeast flows were fully back on-line, a marketer said.
A Sumas uptick of about a dime led the market uprising largely because Westcoast’s McMahon Gas Plant output remained constrained while cash trading went on, one source suggested. It wasn’t until mid-afternoon when full capacity was restored at the plant (see Transportation Notes).
It wasn’t major, but a trend toward colder weather in most market areas finally gave traders some fundamental justification for pushing prices a little higher, a couple of sources said. One noted that Chicago was getting its first significant snowfall of the season Wednesday with about 2 inches coming down. And although AGA’s report of 137 Bcf taken out of storage last week failed to startle anyone, they agreed that the screen’s eventually tacking on a few more cents afterward likely would result in continued mild cash firmness today.
Noting that February futures and Henry Hub cash finished the day in a dead heat around $2.39, a Gulf Coast trader said that might be just what was needed to jump-start more robust storage withdrawals, which have been seriously lagging so far in this heating season. Many NGI sources have cited the sometimes substantial cash premium over the screen during the past month or so as a reason for storage holders to be reluctant to begin drawing down their accounts.
Looking ahead, a Midcontinent marketer saw significance in February futures settling over “the key number” of $2.35 and testing $2.40 in Access as of about 4 p.m. CST Wednesday. “If it stays in that area overnight, I think cash will be pretty strong Thursday,” he said. There won’t be a lot of weather changes in the short term, he added, but computer modeling projects temperatures “getting pretty cold in the Midwest/Great Lakes region towards the end of next week and probably moving from there into the Northeast.” His company’s analyst expects this upcoming patch of frigid weather to stick around for longer than most cold spells have since last November, the marketer said.
A Gulf Coast producer also expects “more of the same” (moderate firming) today, but cautioned, “Watch out Friday.” Traders have got the long Martin Luther King Day holiday weekend to consider and will be having to buy for four days of flow, he noted, adding, “Prices could get slaughtered then.”
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