Northeast citygates peaked above $10 at Iroquois Zone 2 and three other regional points topped $9 as prices in general continued to scream higher Tuesday. There was no denying the market’s fundamental weather support as freezing temperatures, often accompanied by icy precipitation, appeared to be setting up shop in the northern three-quarters of the U.S. and Canada for what could be a fairly lengthy stay.

Tuesday’s gains fell to less than 40 cents at a couple of California points, but the overall market remained about as strong as Monday’s. Several Northeast citygates repeated triple-digit increases (somewhat curiously, Transco’s two normally premium Zone 6 points were not among them), and otherwise advances tended to range from about 45 cents to a little more than 90 cents.

Not knowing about the Iroquois peak because he trades other Northeast points that were “only” averaging around $9, a marketer said he had no doubt that “we’ll see $10 citygates before the week is out.” The bad weather is just beginning in the region and will be getting worse over the next couple of days, he said. It was so relatively warm over the weekend with so much available gas that pipelines were warning not to leave anything extra on their systems; that message has obviously changed now, he added. Indeed, Texas Eastern sent a late-afternoon notice to shippers that it was issuing a customer-specific OFO to take effect Friday. A charge of $25/Dth will be assessed on amounts withdrawn from storage for customers that underutilized their firm transportation contracts, the pipeline said.

The ending of a couple of OFO-like constraints by Northern Natural Gas and MRT (see Transportation Notes) might have seemed like a signal to some that weather relief was approaching. The lessened transport restrictions likely were related to The Weather Channel’s forecast that “portions of the Midwest and Plains will undergo a bit of a warming trend tomorrow [Wednesday].” There was a little bit of panic buying at first Tuesday morning, but then prices were falling back in late deals, a Houston-based trader said. But he and others are looking for sustained frigid temperatures. It appears there might be a little warming in Midwest around the weekend to approximately “normal” early January conditions, which would stay that way for most of next week before turning colder again, the trader said. The essential idea is that the unseasonal moderation that lasted into the early new year won’t be seen again for quite a while.

“It’s 10 degrees and windy here today, so you’ve got to know the wind chill is below zero,” said a Midwestern marketer. He complained of “having the hardest time getting an accurate forecast; it changed dramatically from last Friday to Monday. Noting that MichCon numbers were running 15 cents or so below those at Consumers Energy Tuesday, the marketer thought some people must have left money on the table by not transferring their MichCon supplies over to Consumers; saying, “It would have been only about a dime charge.”

There’s a lot of gas coming out of storage in Alberta currently, said a producer, and it was for both local consumption and to export into the high-priced Midwest and Northeast markets. Calgary was expected to hit minus 9 degrees F. Tuesday night, but get up into the 40s this weekend, he said. That would continue the winter trend in which “we’ve had a lot of much above and much below normal temperatures so far,” he added.

It may seem surprising, the producer went on, that “Midwest utilities are actually selling gas to us in some cases.” Of course it’s first-of-month call options or indexed baseload that’s being sold, indicating that the utilities are pretty comfortable with their storage positions, he said. They can make up to 90 cents profit in selling indexed gas, he noted. The producer professed shock in seeing rest-of-month Chicago citygate deals Tuesday in the $7.40s and $7.50s (compared to a swing average of a little more than $7), noting that was well over a dollar more than NGI‘s January index.

In its Tuesday advisory, Weather 2000 cautioned clients to “expect more of the same, with the chilliest air slowly progressing east this week, followed by some reinforcing shots and short-waves next week. Bitter cold temperatures never last long, so anticipate intraweek undulations and ‘back-side moderation’ (particularly with respect to anomalies) across the Upper Midwest/Plains. However, ‘warm-up’ predictions for the Upper Midwest you may see (i.e., sustained double-digit positive anomalies) is likely being way too overdone by models and other forecasters not incorporating snow-pack effects.

“For the first three weeks of December (which were also colder than the first three weeks last December), nor’easters were the storm of choice, but now we have transitioned to Alberta Clippers and lake-effect events taking center stage, at least for the next two weeks. These are actually the perfect storm types to lay down fresh, light/moderate snows across the Upper Midwest, Great Lakes region, Northeast and even Ohio Valley and northern Mid-Atlantic.”

According to the National Weather Service, the upcoming business week (Jan. 12-16) will remain bullish weather-wise in the East. It predicts below normal temperatures east of a line stretching from East Texas to the western edge of Minnesota. Roughly the western third of the U.S. is expected to be above normal, while an in-between section of normal readings will expand at the top to include Montana and Wyoming, NWS said.

Lehman Brothers analyst Thomas Driscoll estimates a 95 bcf withdrawal in this week’s storage report, saying his prediction “incorporates 10-14 Bcf of demand reduction due to the New Year’s holiday. Without this demand loss, our estimate would have been a 105-109 bcf withdrawal.”

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