Following closely on Thursday’s minor futures uptick, most cashpoints on Friday barely managed double digit gains in a relativelyquiet day of trading. The Northeast and Midwest took the lead onthe plus side, but the West once again stole the show with declinesof more than $8 at the SoCal Border and more than $2 at PG&ECitygate as power demand declined for the holiday weekend.

“Things are still out of control, and it doesn’t look likethey’re going to get much better any time soon,” said one trader.”But the temperatures are considerably warmer now than earlier thisweek, and not as much gas is being pulled out of storage, at leastnot on the PG&E line. It was pulling 600 or 700 MMcf/d earlierthis week, now we’re down to about 100 MMcf/d pull for the weekend.SoCal has been pulling 1.2 or 1.3 Bcf each day. They’re pretty muchdoing a daily balancing act at this point and they just can’t dothat for very long.”

SoCal Border prices ended the week around $20, which was abouthalf where they were at their weekly peak but still about doublebidweek levels. SoCal’s 90% daily balancing requirement, with itspainful penalties of 150% of the high in NGI’s price range, wentinto effect on Thursday and was mainly behind the week’s extremeprice moves. But the border found some relief on Friday with thelong holiday weekend ahead, which historically has been a lowdemand weekend. Power load was estimated to drop by about 3,000 MW.The SoCal Border summer strip settled around $9 Friday with a basisof plus $3.50.

Meanwhile, PG&E Citygate quotes were between $10 and $13 andMalin averaged around $10; both points were down $2 or so fromThursday’s levels.

In the Midwest, a new cold front was expected to produce somevery cold temperatures through the long weekend. The NationalWeather Service’s latest six- to 10-day forecast also showed belownormal temperatures for the region as well as for the PacificNorthwest and Northern Rockies.

Midwestern spot points were up about 10-15 cents on Friday andheld their ground. MichCon and ANR ML7 moved up to the low $5.80s.”Chicago was pretty strong. That was keeping the market up,” saidone marketer. “Chicago was trading in the high $5.70s. Michiganwould have been low except Chicago dragged everything up. As amatter of fact, TCo Pool was trading on average all morning 2-4cents below Chicago; it’s always higher but demand is reallyhitting Chicago. Quite frankly the front is just now coming throughfrom the North and West. I heard it will get below zero tonightwith this new front. Chicago is such a strong demand area when theweather drops three degrees that converts into some pretty bigvolumes.”

However, other sources reported a late drop in Chicago pricesFriday as supply quickly came in from other areas for meet thedemand increases. “Chicago prices tumbled late amid an excess ofPeoples supply sourced from Northern Dmark and Aeco,” said an LDCbuyer.

Dawn has been trading pretty much in line with Michigan prices,which provides very little incentive to bring gas up the VectorPipeline, said another source. “The spread between Chicago and Dawnjust doesn’t want to cooperate. I think they are just getting thatpipeline up and running. Actually the best spread I’ve seen to useVector has been to buy Dawn and sell Chicago, back it down, whichis one reason why they built it, to arbitrage between the two.”

Max rates for firm transport on Vector are 27 cents, butVector’s negotiated rates and IT rates obviously are much lower.Variable costs also are pretty low at about half a percent, saidEnbridge’s Juri Otsason, Vector’s former president and currentchairman of the pipe’s management committee. Otsason said thepipeline has been running close to full at 700 MMcf/d.

Nevertheless, Dawn typically is weaker than Chicago this time ofyear because Union’s loaning practices usually require gas paybackto ensure peak day deliverability, the midwestern source said.”Everybody protects for Feb. 28 through March 15 up here. Those arethe days in a storage market like Michigan or Ontario that you aremost likely to get an extremely cold day and half of your peak daycomes out of storage.”

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