Despite Nymex’s nearly 20-cent tumble, spot gas prices were up sharply in many regions again on Monday. The only locations in the red compared to Friday were in Texas and parts of the Midcontinent. Meanwhile, New York and New England prices soared, at some points by more than $2 to more than $10/MMBtu.

“With New York basically in the $8.20s, Dracut, MA, and Tennessee Zone 6 were definitely the star attractions today,” said one New England gas trader. “There are four things coming together there: we do have pretty cold temperatures right now and forecast for the rest of the week; a robust $6 futures contract [before the fall after 11 a.m. (see related story)] and a strong petroleum complex in general; operational restrictions on Tennessee; and some production off behind Maritimes and Northeast Pipeline.

“It’s not a perfect storm, but definitely a recipe for some strong cash prices,” he said, adding that some people are becoming concerned about potential deliverability problems in March. “We’ve been seeing some huge storage withdrawals, and even the back-end weather looks pretty cold in the Northeast.”

Another regional trader said the buying Monday was mainly in preparation for much colder temperatures on Thursday and Friday. New York City is forecast to reach a high of only 25 on Thursday. The low for Thursday night in Boston is expected to be 7 degrees.

Meanwhile, Tennessee extended its operational flow order to Gulf and eastern Zones 1, 2, 3 and 4, restricting all interruptible transportation (IT) and authorized overruns (see Transportation Notes). Tennessee is restricting 60% of secondary firm. Algonquin also is not allowing IT or authorized overruns. And Texas Eastern on Monday was allowing no incremental increases in IT. By Wednesday Tetco is expected to cut IT entirely, according to one source.

Several traders mentioned reduced supply coming from Sable Island, but that could not be confirmed. However, there was little doubt that higher prices for competing fuels were giving natural gas plenty of room to rise in the Northeast.

“Last week we calculated that the switching point (from gas to fuel oil) would come at a gas price above $7.50 or so,” said a generator. “But now that crude and heating oil prices have run up so much, that number is now closer to $8.50.” After closing at new 26-month and 23-year highs on Friday, crude and heating oil slipped back slightly on Monday.

Strong gas demand in the Northeast has helped add liquidity to some formerly illiquid points. “When I first started trading Dracut six months ago there was nothing going on up here. Today ICE had about 43,000 MMBtus on the screen and over-the-counter handled probably three times that,” said the New England gas trader. “You also are seeing some basis markets being posted. April-October [basis swap at Dracut] is up to 43 cents.”

Dracut is one of the continent’s premium gas market points along with the Algonquin Citygate, which also traded higher than $10 on Monday, and Tennessee’s 200 Leg in Zone 6, which was trading at more than $11. New York quotes were up more than 50 cents from Friday to highs mainly in the $8.40s at Transco Zone 6, but Dracut was up more than $1 from Friday. Power prices in Nepool were up about $13 on Monday to $80.

Meanwhile, the Henry Hub and the rest of the Gulf Coast region were basically unchanged to up a dime Monday. Chicago started in the $6.30s but strengthened to highs in the $6.50s for a net increase of nearly 10 cents from Friday.

In the Rockies, traders continued to report large trading ranges and price increases despite expected milder temperatures this week. “The Rockies were rather squirrely today,” said one observer, noting that he bought at $3.92 at Opal first thing in the morning and then at $4.50 a couple hours later, before ending the day at about $4.40. “Personally I think someone is trying to move the basis in, and right now the supply is tight enough to do that. If you can keep some gas off the market for a while and put it in storage, you can bring the basis in. I don’t think it’s a large producer. I have someone else in mind,” he said.

However, he mentioned that storage is half full right now so deliverability is down somewhat. In fact, Clay Basin storage was cutting withdrawals over the weekend because of strong demand from utilities. Many shippers had their gas allocated over the weekend based on the priority of service. Liquidity also is still suffering.

“There aren’t nearly as many players out here as there used to be, but we did get deals done, not necessarily where I think prices ought to be though,” he said. “We have been seeing wide ranges at Opal, easily 60-90 cent ranges. There should not be that much volatility in one day especially if there is nothing going on in the market and the weather is warming up.” He mentioned the maintenance in the Jonah Field last week was completed adding 100 MMcf/d back on the market.

Opal had a much higher high Monday than on Friday and posted a net gain of 4 cents. But things may be about to change in the Rockies. Denver is supposed to see temperatures in the high 40s this week, 49 degrees on Wednesday.

The California border was strong Monday, but apparently not because of temperature related demand. Highs on Tuesday are expected to be near 70 degrees in Los Angeles. According to some sources, strong Canadian prices have added some strength to California points.

In the Pacific Northwest, Sumas was up a dime or more in reaction to continuing strength in Alberta. Malin also was strong. “On Friday, AECO went out weak because TransCanada called a balancing tolerance change up there, forcing people to cut gas going into the pipe,” said a marketer. “The pipeline was too packed up there, and I think that artificially depressed prices [on Friday] for the weekend. Then all weekend I heard AECO traded strong. Obviously people got rid of too much gas and had to come out buying. When we opened up this morning that strength carried over. Even with the Nymex off 20 cents, AECO still is trading relatively stronger than on Friday. Sumas is up, too.”

The National Weather Service’s six- to 10-day forecast Monday afternoon showed below normal temperatures expected for the Great Lakes, the Northeast and the Mid Atlantic regions. Above normal temperatures were expected over Florida. The rest of the country is expected to see normal temperatures.

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