Transportation values to the Northeast have rocketed to astronomical heights this week, and spreads widened even further on Tuesday as Gulf prices slipped while Northeast points continued to soar, reaching the highs of almost $14 on Iroquois and more than $15 on Algonquin.

“It is colder, and we are seeing outrageous numbers. I saw Zone 2 on Iroquois trade as high as $13.85, up from only $9 on Monday,” said a producer. “Waddington, which is the interconnect from TransCanada into Iroquois in New York, was trading in the $9 area. Tennessee Zone 6 is actually trading behind Zone 2, which seems to be the constrained area, and that’s kind of strange. Zone 6 was up around $10.50 today. Dracut probably was trading nearly that strong as well.”

Iroquois, like many eastern pipes, currently has no interruptible transportation available because of the strong demand. “They are just fully subscribed and have no more space right now.” Tennessee and Texas Eastern also have cut IT, and market prices have soared as a result. Tetco has no forward haul IT into market zones 1, 2, or 3 for Wednesday.

Prices at Dawn were in a relatively tight range in the mid $6.40s on Tuesday, well below locations a little farther east. “It’s just so cold and that’s a constrained piece of pipe on TCPL from Dawn to the Waddington area,” the producer said. “The demand is exceeding the capacity there.”

Transco Zone 6 shot to more than $10 and traded at March futures plus $1, which is historically very strong. “With storage being rapidly depleted, the market is very susceptible to the cold weather,” noted a Northeast marketer.

Meanwhile prices fell in the Gulf by about 10-20 cents. “The screen was down on Monday and down again for the early part of trading today, so that put some downward pressure on cash a little bit. Then the screen popped up, and cash went with it, but not enough to produce net daily gains,” a Gulf Coast trader said.

He noted that anyone with transportation to the Northeast is making about $3.50-$4/MMBtu on the spread. “In a winter like this it really pays to have that pipeline space. In the past, most days we would choke on that capacity, but now if you’ve got it, you are making money hand over fist.”

“Because the utilities are the primary holders of firm capacity, they are the ones who are reaping the benefits of the price spread between the Gulf and the market area,” said a utility buyer. “With the average cost of storage gas far below current price levels, you have to wonder if utilities are not pulling gas from the ground to meet their needs and selling their firm supply into the market. The ratepayers might finally be getting some recovery.”

However, another observer suggested that regulators and politicians in Washington may soon be screaming “market manipulation” because of these price spikes. “When prices are falling, they don’t want price controls, but when they are going up because pipeline capacity is in short supply, they all want price caps. It’s stupid. It’s simple supply and demand. It’s a temporary constraint, and just like the weather it will change.”

He added that transportation restrictions to the Northeast have led to nervous trading activity in the Gulf. “You have to balance on a gnat these days. None of the pipes are letting you take due-shipper gas. If you are long in the pipe, in your transport contracts or in your pools, they won’t let you take the gas. I believe they are just stealing it. You can call it whatever you want. When they have high usage, if you are long, they won’t let you pull it off, but if usage is off and they are choking with gas they scream at you to take it off. It’s a double standard.”

In California, the market appears to be barely alive at these low demand times. Only 30,000 Dth traded on ICE at SoCal border. “There’s so little liquidity out there. I don’t think anyone is doing a whole lot of positional trading,” said one energy services manager. “I’m a little in shock that the Nymex ran up to $6.07 today, but I guess anything is possible with the Mideast situation.

“We are just trying to balance out our positions for our industrial customers, and we’re having a little bit of a problem getting transactions done. I did all my transactions over the phone. I watch ICE, but it’s been so thin lately that it’s not even worth my time. They used to have 200,000-500,000 Dth/d at SoCal Border and at PG&E Citygate. But so little trades out there now.”

Another factor keeping a lid on California prices is adequate in-state storage, he said. “They haven’t drained their storage fields down to nearly the extent as the rest of the country. I think a lot of people are using storage gas now to balance, too, which leads to even less trading. Storage is about 50% full.”

The Pacific Northwest continued to be affected by strong Alberta prices on Tuesday. “It’s been the same story all month,” said a marketer. “Alberta gas has been pulled to the East and that has held up prices in the Pacific Northwest. The AECO-to-Malin spread was tight today, as was Sumas because Alberta prices have been so high.” She quoted Malin in the low $5.30s and Stanfield in the low to mid $5.20s. PG&E Citygate was in the high $5.40s.

“It’s hard for people to move gas down to PG&E Citygate with the spreads so tight, so demand is being supplied by in-state storage, which is still pretty high but depleting at a good rate now,” she added. “We expect more of the same later this week.”

Prices at Opal, WY, were considerably stronger Tuesday than on Monday and once again Rockies traders had a hard time explaining it because temperatures are mild this week. “There were some problems at Granger earlier today that kept about 50,000 Dth off for about eight hours, but that wouldn’t cause prices to spike like they have been recently,” said a trader. “I think that there are some marketers out there who are either filling some markets on Kern River or it’s just a large marketing position that they brought into the month and they are really short physical gas. That’s the best I can make of it.”

He noted that the spread between CIG and Opal has really grown recently. “I think that might be a premonition for the blowout that might happen this summer with the Kern expansion. You might see those eastern and western Rockies markets start to disconnect quite a bit. We are seeing 15-35 cent spreads on the day. Opal is ranging from the $4.40s to the $4.60s today with CIG in the $4.20s. By this summer the spreads could be more than $1.”

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