The 10-cent spike in March futures in the face of softer holiday weekend demand at most locations was enough to help cash prices manage gains of about a nickel on average and much more in the Northeast, which was expecting severe cold on Saturday and Sunday.

“It looks like we’ll have to wait until Tuesday to get above freezing in Connecticut,” said a utility buyer. “Tuesday is expected to have a high of 33 and a low of 24 so that’s 36 heating degree days (HDDs). We’ve been experiencing 50 HDDs and up lately so 36 looks pretty good.” She said Connecticut had 55 HDDs on Thursday and Saturday was expected to be even colder. Average HDDs for this time of year are 38.

“We have LNG that is cheaper than spot gas, and storage gas that is much cheaper so we’ve avoided buying much on the market. LNG is less than $10 and storage costs are under $5. But we have to conserve that to make it through the winter.”

Deals were done Friday at $16.50 at Parkway on Union Gas’ system. A utility buyer said she came into the market because her storage is being depleted so rapidly. “Dawn is reasonable, but is trading pretty strong because of Union having some IT cuts and tight balancing. Utilities are buying because their storage is getting really empty. We are a big buyer right now. Union has been having some pressure issues all week so they are holding people to their firm numbers and no more. They aren’t offering any extra services for people to get their gas to Parkway, so Parkway traded to ridiculous levels today, over Iroquois Zone 2, which only traded at $12.50.”

Union said IT transport to Parkway could be interrupted and interruptible hub services may be curtailed. TransCanada also has some bottlenecks. “They are packing the West side of the system and the East side of the system is being drafted. IT is not moving into all these points because they can’t get it past Station 75 in Ontario. It’s a natural bottleneck in the middle of winter,” the utility buyer said.

She said Vector has been full the last couple months. “Vector currently is trading 10 cents for IT and 5-6 cents for fuel, so you are looking at least at a 16-cent spread requirement from Chicago to Dawn, and there was a 30-cent spread there today. You could buy Chicago and still make money if you are on IT.”

Meanwhile, Dracut in Massachusetts at the end of the Maritimes system was still a wild ride, according to a trader. “I trade this market everyday and it really made no sense today. A couple of $12s got paid and then it slowly eroded away down to $10.25, but then boom, it was right back to $11.25. Then it almost did that again. You got me.”

He said the high prices in the Northeast have attracted a significant number of players and large volumes of trading. The long weekend and the expectations for a cold Saturday and Sunday increased the volatility on two-day and four-day packages. “People were unsure whether Saturday and Sunday should trade at a premium to the full four-day strip or the opposite.”

Another factor may have been the announcement by EnCana that it would delay its Deep Panuke project to reevaluate the economics (see related story this issue and Daily GPI, Jan. 6). “That’s a huge announcement and it’s not good for anybody involved in the long-term gas business up here. Whether or not it is part of this whole regulatory game is anybody’s guess. It could be just a stunt, but look at where prices are. If anything, prices are $2-3 higher than where everyone thought they would be.

“New Brunswick has said they are going to re-introduce their proposed export restrictions (see Daily GPI, Sept. 20). It’s a lengthy and costly regulatory process that is going on, and EnCana may just be fed up with it. If they don’t produce any gas that’s bad for everybody and the economy.”

However, he noted that EnCana has expressed doubts about the amount of Deep Panuke reserves. It’s decision to put the project on hold will come as a major setback to Maritimes and Northeast’s plan to expand to 2 Bcf/d by the end of the decade. Deep Panuke was expected to double Maritimes’ throughout in 2005 to more than 1 Bcf/d (see Daily GPI, June 15, 2002). “Even Shell came out a couple of weeks ago and said that its reserve estimate for Sable Island had been lowered overall,” he added.

If anything, current prices would help the economics of Deep Panuke, the trader noted. The forward curve has improved substantially. Next winter is trading two and a half times what it traded this winter. “Dracut is at basis of a buck for next November through March. Early last October, the November-March basis strip was trading at 27 cents. By late October, there were some production issues at Sable and they had a really bad month, so it traded up to 49 cents because people kind of freaked out.” He said the Dracut basis spread this winter has averaged about $1.75. It was $2.20 in January. Last spring the April-October basis strip at Dracut traded at plus 17 cents, but this summer already is trading at more than plus 40 cents.

Dracut prices averaged $10-11 on Friday — a $5-6 basis, but by next Wednesday basis is expected to fall to plus $1.50, “so put it in the $7-8 range next week,” the trader said.

A lot depends on the weather as always and the National Weather Service’s (NWS) six to 10-day forecast has been a little shifty lately. Below normal temperatures returned to the forecast on Friday after being completely absent in Thursday’s outlook. Suddenly the NWS expects the entire section of the country west of the Rockies to see below normal temperatures at the end of next week. The area of above normal temperatures, which was over the entire southeastern quarter of the United States on Thursday, shrunk to just the Southeast region. Normal temperatures are expected over the rest of the country.

Despite the continuing cold in New England over the weekend, many other locations were expected to see much milder temperatures. The warmer weather, however, failed to prevent most locations from seeing higher prices on Friday. Only a few points lost a penny or two in the Gulf Coast region and the Pacific Northwest. Many observers were expecting much softer prices on Friday.

“It surprised a lot of people who came in ready to dump their gas for the long weekend,” said a Southwest marketer. “But it was a typical trading day for a holiday weekend. It usually falls too fast and then bounces back. People often come in, freak out and sell, sell, sell and then oversell and have to buy back. Then it goes back up. I can’t tell you how many times that has happened to us.” She said Waha was up a nickel or more while Midcontinent points gained a few cents.

“The Texas utilities came out to buy after not buying at all on Thursday. The weather is just cool enough to drive them out into the market and create a little strength out there.”

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.