With the AGA report of yet another weekly injection of 7 Bcf for the second week of November and mild weather continuing across most of the country, natural gas spot prices tumbled lower again Wednesday, causing some unusual price spreads between regions and some significant storage plays for those with a little space still available. The Rocky Mountain region once again was the exception, with sharp increases attributed to a short-term storage play.

Prices in the Appalachian region made a very rare trip below Henry Hub quotes Wednesday. With mild weather and full storage in the Northeast and greater competition between Appalachian and Canadian gas since the Alliance and Maritimes pipelines were put into service, Appalachian producers have felt increasing downward price pressure. Northeast locations showed declines of 20 cents or more Wednesday, compared to 10-cent drops in the Gulf Coast region, which led to the discrepancy. The average daily Henry-Dominion (CNG) basis over the past four years has been plus 22 cents. On Wednesday it was a nickle at best and fell to minus five cents at times.

“There were times when [Dominion] CNG was trading more than 7 cents under the hub, and I would say we’ll see a ditto copy tomorrow,” said one Gulf Coast region trader. “It’s the first time I’ve ever seen that happen. Toward the end, it really got ugly. The hub was trading $2.35, and CNG was trading at $2.28. That’s pressure from all the gas that’s up there, whether its Canadian gas coming down from Chicago, Sable Island gas or gas from the Gulf. Weakness abounds at the citygates in Boston and New York. There’s no room at the end of the pipe in storage so what do you do?”

“This is a tough November, I tell you. I can’t think next week is going to be any better either,” the Gulf Coast trader said. “The forecast is for way above normal temperatures. Some areas are 10-15 degrees above normal now, and are expected to stay at least five degrees above normal through Thanksgiving, turning colder after that. But that’s a couple weeks away. There’s no real hope in sight yet for any winter weather.”

The story was much the same everywhere else Wednesday, with traders reporting warm rainfall in the Northwest, mild temperatures and no demand in the Southwest, full storage everywhere and weak spot prices. West Texas gas traders saw light trading and spot deals off a nickle. In the Chicago area, deals were being reported in the $2.20s, still extremely discounted to the December futures screen.

“Buying gas, putting it in the ground and selling the December contract is quite a lucrative business right now if you have the storage,” said one Midwest region marketer. “We had a little room in storage so we’re taking advantage of a storage play here for next month. We locked in index minus 60 for next month, so it’s looking very good for us compared to minus 1 cent last month.” Storage is nearly full in Chicago and all the pipes are packed to the rim. The forecast is for 70 degrees over the weekend so there should be no break in the warm spell.

Storage played a larger role in the Rockies yesterday where price rises once again were the exception in the overall weak market. Sources continued to attribute the 20-cent increases to newly available interruptible storage space in Questar’s Clay Basin field. Questar made 1 Bcf of IT space available earlier this week. “Prices at Opal traded as high as $2.05 late this morning after starting the session near the $1.75 mark,” said one Rockies marketer. “Buyers were out with a vengeance because the spread to next month made it economically favorable to buy spot November gas, inject it into the ground and sell December gas. At one point this morning, December Opal gas was trading at $2.16, which more than covered the 20 cent storage cost (10 cents in and 10 cents out). However, the screen has fallen since then and the basis has compressed slightly. At minus 59, the Opal basis for December implies a December cash price of about $2.10.”

San Juan non-Bondad rose 20 cents, but there was no sign of Southwestern power demand. San Juan started in the $1.90s and then rose to $2 before falling back into the $1.80s. “That’s still not low enough for us to buy it,” said one generator, “but then again we don’t really need it right now. Power demand is way down. The weather is perfect, and we should be at this level for most of the month.”

PG&E California Gas Transmission called an operational flow order for Thursday with 0% tolerance and a $1/Dth noncompliance charge. “The OFO is due to the pipeline being overstuffed,” said a California-based trader. “Prices were down and stayed down when they called the OFO, but the pipe’s been full ever since the weekend. Until we get some weather, all this winter gas on the pipe will be struggling to find a home. It’s rainy and warm.” He said prices fell below $2.10 at PG&E Citygate toward the end of trading.

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