Falling cash prices at nearly all points Thursday reflected the fact that the latest blast of cold weather is starting to wane, although forecasts of Friday lows around freezing were still common in northern market areas and extended as far south as Atlanta.

Northeast citygates, which had soared on Wednesday, yielded similar amounts of price ground Thursday in leading overall losses ranging from 2-3 cents to about 85 cents. Several points, almost all of which were in the West, recorded flat to about a nickel higher numbers.

The near-term outlook for weather fundamentals is mostly bearish, although below-normal temperatures in the West next week may allow some rallies in that region. But “strong warming” will likely develop in the Midwest and East in the coming days, according to Daniel Guertin of Lehman Brothers. “February 2008 is shaping up to be vastly different than last February,” he said in a Thursday advisory, “with temperatures for at least the first half of the month forecast to average above normal everywhere in the East, and temperatures in the West forecast to average below normal. On a population-weighted basis, February 2008 is forecast to average 15-20% warmer than last February.”

Calgary’s low of about 4 degrees Thursday came after an extended period of sub-zero temperatures. Western Canada’s emergence from the deep freeze had Westcoast Station 2 dropping about C30 cents while NOVA Inventory Transfer was less than a nickel lower. That reduced the Station 2 premium to about C8 cents from a 36-cent spread on Wednesday.

Last week saw a record-setting pace of storage withdrawals as the Energy Information Administration reported a pull of 274 Bcf for the week ending Jan. 25. The previous record was 260 Bcf, set for the week ended Jan. 17, 1997. Nymex traders were unimpressed by the new peak volume, however, even though it was above prior expectations in the mid to high 250s Bcf. At least one slightly higher estimate of 278 Bcf had been made for last week, so the possibility of an extra-high withdrawal had been thoroughly factored into the market beforehand, one source told NGI (see related story). March futures eked out a meager gain of 2.9 cents in their second day of prompt-month status.

PG&E and Northern Natural Gas are ending OFO-like restrictions Friday, but Southern Natural Gas will begin an OFO Type 6 for short imbalances that is expected to last through Saturday (see Transportation Notes). In spite of the OFO, Southern saw one of the Gulf Coast’s biggest price drops of about a quarter.

The Midwest can expect another cold front early next week, but it will not be nearly as frigid as the arctic air that occurred Monday through Wednesday of this week, The Weather Channel said. A major snowstorm will exit the Northeast by Saturday, but “a new potent storm” will enter the West this weekend, it added.

A trading representative for several Gulf Coast independent producers said that even with the warming trends developing, there was still enough demand for Friday gas that she had no trouble at all placing their gas. The market is currently in transition from yet another of the frequent cold-mild-cold-mild patterns the last couple of months, she noted. She trades on Southern but said the OFO was no problem for her company because it doesn’t do any transportation. The producer clients put gas into Southern and let the buyer cope with the OFO, she added.

A Florida utility buyer said bidweek prices got stronger as trading went on, and he thinks the expectations of heavy storage withdrawals had something to do with that. Southern Natural Gas basis started around plus 14 cents just before bidweek began but got as high as plus 27 cents late, he said. Thursday was quiet for him in the daily market; weather is considerably milder in the Sunshine State than elsewhere and gas demand is low, he said. Florida Gas Zone 3 fell nearly 20 cents Thursday.

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