The market demonstrated once again Thursday that widespread severe cold is not necessarily a gas price booster. Prices dropped at nearly all points as two prior days of major futures weakness took their toll on the cash market. Increased use of storage was still believed to be supplanting potential new purchases of spot gas, and while frigid weather will last into the weekend in northern market areas, it would be less cold than before in many sections.

Most points recorded declines ranging from a little less than a nickel to about $2.80, with most of the Northeast citygates taking triple-digit hits. A few flat to nearly $1.50 higher points were in the Gulf Coast, Appalachia and mostly noncitygate locations in the Northeast. The non-New York pool of Transco’s Zone 6 was the only Northeast citygate delivery point to continue rising Thursday.

To one source, the main point was that while conditions will still be frigid Friday in northern market areas, in many cases it will be less frigid than before. That is particularly so in the Midwest, he noted, where some locations such as Chicago will be rising into single-digit temperatures after staying below zero Thursday, and some western sections of the region will be getting as high as the teens and even low 20s.

The Weather Channel (TWC) website summed up Friday’s overall U.S. forecast succinctly. Under the headline “A nation divided,” the forecasting service said, “The East will shiver in arctic cold with temperatures 10 to 30 degrees below average while the West remains quite mild.” Deep freeze conditions will encompass all of the Northeast and Mid-Atlantic, TWC said, with morning lows ranging from minus 30 in Caribou, ME, to near 20 in Norfolk, VA.

The PJM Interconnection electric grid operator said it issued a Cold Weather Alert in its entire service area for Friday and Saturday “because of the frigid weather, which is causing higher use of electricity.” It said such alerts prepare personnel and facilities “for expected extreme cold weather conditions, when actual temperatures fall near or below 10 degrees.”

Southern Natural Gas fell nearly a dime despite an OFO Type 6 for short imbalances taking effect Thursday and forecasts of Friday lows in the lower teens in much of the eastern South, its primary market area. After a fairly mild daytime Thursday, the western half of the South could expect a taste of cold weather starting that night, but few locations were expected to go below the freezing level.

The West will continue to “bask” in temperatures ranging from seasonably cold to mild. Even the Rockies is relatively moderate; although Denver’s low will be in the mid 20s Friday, it can look forward to a daytime high in the mid 50s.

For the third time in a row the Energy Information Administration came up with a short-of-expectations storage report, saying 94 Bcf was withdrawn in the week ending Jan. 9. Consensus estimates had been in the low to mid 100s Bcf. The response of Nymex traders was understandably bearish, especially in conjunction with another plunge by crude oil futures. They sent the February natural gas contract 12.7 cents lower (see related story).

The continuing screen weakness, the prospects for some relief from harsh winter weather and the extra loss of industrial load associated with a holiday weekend make it highly likely that most if not all points will be softer again Friday.

One issue of excess supply in the West was easing as Kern River said previously high system linepack had returned to normal and Southwest Gas relaxed an OFO (see Transportation Notes). However, another one was surfacing as El Paso said it had set its probability of declaring a Strained Operating Condition or Critical Operating Condition to high because of excess linepack.

A Midwestern marketer noted that even though temperatures were forecast to rise Friday, a wind chill advisory would remain in effect through Saturday in her area. She thought the significant futures weakness of the previous two days — in both natural gas and crude oil — had a lot to do with the cash market’s inability to stay firm in the face of frigid market-area weather. Her company has been dealing with an OFO on the Michigan Gas Utility system since Tuesday, she said, and hopes it will be lifted before the holiday.

Much of the Midwest is supposed to get a couple of days of relative moderation next week, the marketer said. Then it’s back to colder weather again, she added, but it won’t be as harsh as during this past week.

©Copyright 2009Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.