As expected, Monday’s 36-cent fall in November futures and moderating weather trends in some areas resulted in softer cash prices at most points Tuesday. A few scattered points that were flat to up a little more than a dime ran contrary to the overall market direction.

Otherwise, quotes dropped anywhere from a few cents to about 80 cents. However, the bearish nature of such movement was somewhat skewed by quotes for the Florida market, where cool to mild temperatures have replaced hot weather that had prompted Florida Gas Transmission to keep an Overage Alert Day in place as recently as last Saturday. A quote for the Florida citygate at $7.45 represented the biggest decrease of the day, while Florida Gas Zones 2 and 3 fell about 40 cents and 60 cents, respectively. Disregarding those points, Tuesday’s losses were capped at around 35 cents.

Usually cash is prone to following the lead of prior-day futures movement, but Tuesday’s strong rebound by the November natural gas contract was largely attributed to Monday’s strength in the physical market (see futures story).

Convergence of cash and screen prices, which had overshot each other Monday (Henry Hub was up 41 cents to $7.29 while the screen’s fall carried it to $6.881 for a Hub premium of about 31 cents), was much closer to synchronicity Tuesday. The Hub fell to around $7.13 while November futures rallied to $7.091, leaving a spread of only about 4 cents.

Although freeze and frost warnings remained in effect for Tuesday night in much of the Southeast, temperatures were starting to rise. For example, Atlanta’s forecast high of 59 degrees Tuesday was expected to be replaced by a 68 peak Wednesday. A more subdued moderation was due in the Midwest, where Chicago’s Tuesday high of 47 was likely to rise to 51 Wednesday. Little change is expected in the Northeast, where temperatures never really got severely cold anyway, or in the West.

A trader who markets gas for independent producers expressed surprise that the screen could rebound so much when a spate of cold weather is seeing such a short lifespan. But then again, he also found it surprising “to get so many calls for November gas” in the Gulf Coast and for daily gas at Waha. His company is having no trouble at all placing its gas each day, he said. He noted that intrastate Texas demand should be very low at this point, saying it’s cool at night and quite comfortable during the day. Instead of running the air conditioner, “we’re keeping the windows open at our house,” he said.

A Calgary-based producer was in at least partial agreement, saying that despite Tuesday’s cash softness, “everything seems really strong.” Early instances of winter-like weather have caused storage inventories to not “look all that bulging any more,” he said. He also was finding it easy to get supplies placed.

One might expect the screen rebound to lift cash Wednesday, but the producer reported seeing falling spot prices near the end of trading Tuesday, so he would expect Wednesday’s cash market to be mixed and close to flat. Transport spreads were not working for him Tuesday. Midcontinent field prices are too high to make any money on moving gas to Midwest markets, he explained.

Bidweek business is already pretty active, the producer continued. Chicago citygate basis for November was running at plus 22-23 cents Tuesday, he said, while Chicago index deals carried a premium of 4 cents.

A Gulf Coast trader agreed that bidweek activity is “hot and heavy.” In fact, she replied to NGI, “The other phone is ringing and we’ve already started bidweek business, so I’ve got to take that call.”

It’s close to freezing at night in the Upper Midwest, said a regional marketer, so her company is having to buy some swing gas. But it definitely was not happy with the way screen rallied Tuesday. She noted that normal highs for her area in late October are in the 50s instead of the 40s that are currently being experienced. However, Monday’s forecast suggested that local temperatures are going back to above normal in November.

It’s an East-West divide on above or below normal temperatures during the Oct. 30-Nov. 3 workweek, according to the National Weather Service (NWS). It predicts below normal readings everywhere east of a line running to the south-southeast along the eastern edges of Minnesota, Iowa and Missouri through the western end of Tennessee into eastern Mississippi. NWS looks for above normal temperatures from the western two-thirds of Texas through the Rockies and desert Southwest into the West Coast states as far north as northern Oregon.

Analyst Tim Evans of Citigroup is expecting a storage build of 30-40 Bcf to be reported for the week ending Oct. 20.

©Copyright 2006Intelligence 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.