As a marketer had predicted, prices were softer at a large majority of points Thursday due chiefly to a 35.4-cent plunge by the expiring December futures contract the day before and milder weather returning to the South. Northeast citygates, where temperatures are falling and will bottom out around freezing or lower Friday, saw nearly all of the flat to about 75 cents higher exceptions to the overall market trend.

Florida Gas Zone 3 in Louisiana was flat, making it the only other point outside the Northeast to avoid a fall. Florida Gas Transmission warned market-area customers for the third day in a row of a potential Overage Alert Day due to low linepack.

Otherwise, Thursday’s losses ranged from 2-3 cents to nearly C50 cents at Westcoast Station 2.

The Energy Information Administration fell short of consensus estimates around 20 Bcf when it reported a 12 Bcf storage withdrawal for the week ended Nov. 23. The new prompt-month January natural gas futures contract was up early Thursday morning in concert with a huge overnight spike in crude oil prices sparked by the explosion of an Enbridge crude line in Minnesota Wednesday afternoon. But with three of the four parallel lines at the site being restored to service Thursday and Enbridge expecting the same for the fourth line in a few days, January crude oil pulled back to a small gain and the natural gas contract followed suit, ending the day with a 3.4-cent decline.

In a “Flash Commentary,” Citigroup analyst Tim Evans said, “The 12 Bcf in net withdrawals from last week was bearish, below expectations and below the five-year average. We wonder if the Thanksgiving holiday might have cut into demand more than usual but, regardless, this indicates a weaker supply/demand balance in the market than we would had guessed.”

Although many analysts have been pointing to moderating intermediate-term weather forecasts to justify their bearish attitudes, Weather 2000 has a more bullish prediction. “Polar air (coldest yet of the year) [is] on tap for [the] Midwest and then [the] Northeast during next week,” the New York City-based consulting firm said in an advisory Thursday. “Some even colder air [is] on tap for [the] Midwest and then [the] Northeast during [the second] week of December.”

A spokesman for operator Williams Field Services said the Opal Plant’s Turbo Expander Plant (TXP) 5 was still out of service (see Daily GPI, Nov. 29) Thursday due to a problem in a temperature transfer device. The company is looking at Saturday night or early Sunday for bringing TXP 5 back on-line, he said. Each of the plant’s five TXP units has a capacity of processing about 300 MMcf/d, so TXP 5’s outage represents about a 20% reduction in Opal output, he added.

Kern River, which suffered a significant supply shortfall Wednesday from the Opal volume cut, has been working with other interconnects besides Opal to bring more gas into the system, a pipeline spokesman said. Linepack has now returned to normal in the north end, although it remains low in the three downstream segments, he said. Opal contributes about 55% of Kern River receipts, he said. Enterprise Products Partners’ Pioneer Plant and Questar Line 104 interconnect account for most of the rest with a combined 700-800 MMcf/d, while the remainder comes from miscellaneous receipt points.

Sumas quotes, which had been buoyed Tuesday and Wednesday by Northwest’s Overrun Entitlement north of Kemmerer (WY) Compressor Station, were unable to stay afloat Thursday, dropping nearly 20 cents. Westcoast Station 2 also failed to retain the bullish impact of the entitlement. It took the day’s biggest tumble even with the pipeline saying its linepack was below target levels and that cooler temperatures and higher flows were expected for the next couple of days.

A utility buyer in the South hinted at a reason to anticipate weakness in the December aftermarket due to increasing use of storage in lieu of buying spot gas. He figures that the company will need to pull about 75,000 Dth/d out of storage during the month, which is about 30% of its load. He was not buying any baseload for December, saying winter term contracts will cover the rest of the utility’s needs. If it “gets extremely cold, we’ll buy some swing gas,” he said.

The buyer said his utility will need to empty its LNG facility eventually, but as a precaution it always waits until late February to do so after winter peak loads have passed. The company’s Panhandle Eastern firm deliveries were cut 10% Tuesday due to pipeline restrictions, he said, but no reductions have occurred since then.

Despite PG&E having a customer-specific low-inventory OFO in place (see Transportation Notes), the PG&E citygate and Malin dropped about 20 cents and 15 cents, respectively. PG&E projected that linepack on its California Gas Transmission system would fall short of its targeted minimum levels through Saturday.

A western trader considered it “really odd” that PG&E citygate and Malin prices don’t always react to OFOs in the way one would expect, although she acknowledged that the current OFO is customer-specific and not systemwide. Daily gas is trading well above December baseload numbers, she noted, adding that’s probably making some people think, “Why should I buy spot gas now when I can get it cheaper next month?”

December bidweek trading volumes were pretty steady for the first three days, then fell drastically Thursday, but that’s what usually happens after the futures expiration, she said. Prices really trailed off Thursday in the small volumes that were still getting traded, she added. PG&E-Topock got down to $6.69 Thursday after having mostly been in the $6.80-7.00 range earlier this week, the trader said. The point averaged a little more than $7 on ICE the first day (Monday), she said.

Overnight lows in the teens did nothing to keep Rockies prices from joining the overall softness. The same was true in the Midwest, where freezing lows were due to continue. Northern Natural Gas indicated how cold it was in the market area, noting that its normal system weighted temperature is 27 degrees at this time of year but was projected to be 22 Thursday and Friday before falling to 18 Saturday and Sunday.

Although Rockies prices have been relatively healthy recently, still averaging more than $6 Friday despite softening, regional producers are still counting on the pending opening of Rockies Express (REX) West to take them to the next level. REX operator Kinder Morgan says some part of REX West could be up and running by Dec. 15, although it doesn’t guarantee that. No doubt that would involve the sections coming east out of Cheyenne Hub, one trader said. He noted that Kinder Morgan has been in the process of buying an estimated 3 Bcf of linepack gas since mid-October.

It may take until February to get the line fully operational all the way to Missouri, the trader continued. That’s not a big deal, though, he said, because the part that will be completed before then will reach the main interconnect points before it gets to Missouri.

The real problem in the Rockies is not in the winter, said another source, as regional demand usually increases by about 1.5 Bcf/d then. There is plenty of pipe capacity to move gas south out of Wyoming, he said, and when Denver gets cold weather, that’s just what happens. Wyoming prices invariably go up when the Front Range of the Rockies gets cold, he added.

It’s the off-winter months that are trouble for Rockies producers because regional (and national) gas demand is down, and the east-west pipes out of the Rockies get full without much demand from Denver and Salt Lake City, the source said. To make matters worse, takeaway capacity is often restricted due to all of the maintenance that occurs in the spring and fall, he added. “The bottom line is that we need REX to be fully operational by this spring to avoid more price weakness at that time.”

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