What may be bullish traders’ last weather hope in an otherwise disappointingly mild winter was developing Monday, but the price reaction was somewhat subdued. Most eastern points ranged from flat to slightly more than a nickel higher, while western gains tended to be larger at about a nickel to nearly 15 cents. The stronger performance in the West was largely attributed to recovery from weekend softening, the absence of high-linepack OFOs in California and demand in the Midwest for more Rockies supplies.

The market seemed to show more interest last week in the current spread of wintry weather than it is now, commented one source, referring to overall price increases of 10-15 cents last Tuesday and Wednesday. Presumably much of the price-enhancing value of the colder temperatures had already been wrung out before yesterday, but he and others also noted that the approaching cold did not appear to be as severe Monday as what had been forecast through the end of last week.

Nevertheless, there was genuine demand-boosting weather either already arrived or in the works for nearly all market areas outside California and the desert Southwest. An arctic front had pushed southward from Canada into the Plains states over the weekend and was spreading into the Great Lakes region and Gulf Coast production area Monday. It was expected to begin seeping into the rest of the South and the Northeast by tonight.

In addition to several pipelines that are issuing OFOs or similar constraints due to the colder weather (see Transportation Notes), Reliant, Gulf South and Florida Gas Transmission were among those cautioning shippers Monday that OFO-like actions might become necessary.

To one marketer, the key question was: will there be enough cold to really make a big difference in prices? “To us, the answer is no,” he said. “Most of the associated price run-up already seems to have been accomplished last week, and we don’t see any substantial new increases this week even though the actual cold is just now getting here.” Also, this blast of cold will be relatively short-lived, with most areas due to start warming up again by the weekend, he pointed out.

The marketer and other sources also had to have doubts about the weather-driven rally’s staying power after seeing the March natural gas futures contract plunge nearly 15 cents, while Nymex also recorded similar weakness in the crude oil and heating oil trading pits.

A Midcontinent trader noted that several points were moving higher in late deals. Waha started in the high $2.20s and eventually wound up in the mid $2.30s, largely due to intrastate Texas demand, he said. “We made a lot of sales to Texas utilities and end-users” anticipating freezing temperatures in the state after Monday night. He considered it “pretty significant” in analyzing the strength of swing prices that Nymex was trading below Waha during the morning.

The West was no longer under the onus of high-linepack OFOs by California’s two big LDCs. However, a marketer noted that he “sure made the right call” Friday about having to watch out for a Sunday OFO by PG&E. The utility re-implemented one Sunday after having lifted Friday’s OFO on Saturday.

A couple of traders noted that March values are running considerably behind late-February swing prices. A western source reported deals at Sumas in the low $2.10s and at Malin in the low $2.20s; both were slightly more than a dime under his incremental numbers.

New basis quotes include the PG&E citygate at plus 4-6 cents; Malin at minus 8 cents; Transco Zone 6-NYC at plus 37.5 cents; and Dawn at plus 13.5 cents.

Today will be key to where the March market is going, a Canadian producer said. “Everybody’s trying to position themselves” for getting more heavily into March business as soon as the screen settlement is announced. He said he was “leaning toward the bearish side for the aftermarket.” However, he thought many people were paying too little attention to the issue of a rapidly declining supply picture and when that would start making its impact felt.

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