In sharp contrast to falling prices in all other areas,Northeast citygates were moving higher Tuesday. By far the mostdazzling performance came from Transco deliveries into New YorkCity that spiked by about a dollar above $4, much as they had onNov. 30. Unlike the end of November, when Transco Zone 6-NYC quotespeaked at $4.75, Tuesday’s top end hit $5.05.

Outside the Northeast, nearly all points dropped between anickel and a little more than a dime in what traders generallyagreed was a mild “consolidation” retreat from the gains achievedin the past week or so.

Cold weather played a relatively minor role in theabove-freezing New York market, said one trader, noting that it wasmuch colder in the Midwest. Instead, Tuesday’s massive uptick wasalmost purely pipeline-driven, he said. In addition to Transcohaving no market-area IT available as of today (see Daily GPI, Dec.21), Tennessee announced new restrictions for Zones 5 (which servesthe NYC area) and 6.

The transportation constraints allowed Enron to leverage itsnear-stranglehold on capacity into the Big Apple for big profits,several sources charged. Enron Capital and Trade Resources achievedmuch of its clout in a February 1998 deal to manage the supply,storage and pipeline capacity (nearly 550 MMcf/d) of Brooklyn UnionGas. The one-year contract began April 1, 1998 and was renewed fora year, meaning it will expire March 31, 2000.

“Really it’s the Linden (NJ) bottleneck on Transco that mattersmost,” a marketer said. The pipeline had said people were pullingtoo hard in New York City, causing its elimination of IT service,he said. “But that just makes Enron pull gas even harder. All they[Transco] are doing is putting money into Enron’s pocket.”

Another trader chimed in, “Enron has got a nice thing going upthere. All they have to do is go long [Transco] Zone 6 and short[Texas Eastern] M-3, and then sit back and watch the market come tothem.”

However, one source expects the most recent NYC spike to beshorter than the one on Nov. 30, saying prices should be settlingdown again before Christmas.

A Chicago-area buyer found it difficult to make purchases at thePeoples citygate “because everyone was taking their supply toNI-Gas where it was fetching as much as a nickel premium.” She wasloathe to withdraw from storage, “especially considering the waythe jet stream is setting itself up for the rest of the year. Itseems like the winter that everyone wanted is finally upon us, andI would rather buy in the spot market now than get caught withoutstorage later.”

After reaching parity with the PG&E citygate around $2.68Monday, the Southern California border was in the unusual positionof trading several cents higher Tuesday (GPI’s December index of$2.37 at the border was 15 cents below the citygate index). Onemarketer found little surprising in the new price juxtaposition,noting there was very little demand from a relatively warm NorthernCalifornia and that SoCal Gas has a lot more storage space andsystem flexibility than PG&E. Another source noted that Oaklandhad set a record high temperature for the date Monday. “Even themountains are mild with temperatures pushing into the 50s in [Lake]Tahoe,” he said.

Saying the January bidweek was still largely a non-event so far,a western trader reported physical basis of minus 6.5 for Sumas,minus 3 for Malin, minus 17 for Northwest and Kern River in theRockies, plus 11 for the PG&E citygate and plus 1 for theSouthern California border. Border basis tends to weaken in winter,she said, but that plus 1 reading seems unusually mild.

An eastern source said basis for Transco Zone 6-NYC had risen 6cents from late last week to plus 80-83 Tuesday.

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