Except for triple-digit advances for Dominion and Northeast citygates, the major volatility of recent days continued to subside Wednesday. It was also a second straight day of mixed price movement. Most of the East shared the Northeast-Dominion firmness but with much smaller increases; however, Chicago citygates and NGPL-Midcontinent saw drops of up to about 70 cents after a winter storm had moved eastward out of the Midwest market area.

Gains of 35-50 cents were reported in the Southwest basins, but otherwise the West tended to be mildly softer outside of declines approaching US70 cents in the Rockies and C70 cents in the intra-Alberta market.

Cash was taking its cues mostly from weather fundamentals and storage report expectations, since the April natural gas, crude oil and heating oil futures contracts varied little from flat. The storm that had dumped snow on the Midwest Tuesday was moving into the Northeast Wednesday, although its total impact was forecast to be somewhat limited. Conditions in the South continued to more closely resemble spring than winter with highs ranging from the 50s to the 80s due Thursday throughout the region. And although mountain areas of the West were likely to see more snow Thursday, the rest of that area was expected to enjoy seasonable temperatures.

Northeast prices were getting bid up again as utilities and end-users try to avoid using their storage if possible, said a New England utility buyer. A lot of people are expecting another big withdrawal volume in Thursday’s EIA report, she said, which is especially significant in the East, which has been drawing down inventories faster than other regions this winter. Also, “it’s looking like colder than normal here in the latest eight- to 14-day forecast.”

Another Northeast trader said he was hearing that some area utilities are actually injecting into storage this week because they’re worried about the possibility of running out before the end of this month. “They know they’d be in deep [feces]” with their state regulators and ratepayers if a deliverability crisis were to occur, he added.

The trader went on comment that it seems “an odd, illogical market” to him. “We’re seeing large price moves in short periods of time but not sustaining them. That tells me there’s a lot of emotion in this market.” He reported experiencing a $3 spread within 90 minutes Wednesday at Dracut in a low-high-low movement. There are some telling their trading staff that “if this thing starts running again, you get in right away and save us from buying $30-plus gas again. What do price increases of 50-75 cents now matter if you manage to save $10-12 later?”

A Northeast-based producer perceives a pattern developing. “It seems every day this week starts low, trades high, then comes off at the end. Tomorrow [Thursday] is going to be a big day. Someone said a 170 Bcf withdrawal, but we don’t even want to guess a position. [Northeast] temperatures Wednesday were in the 40s and I’m looking at sun right now, so I’d say things are moderating. Reports are saying another arctic blast will be on its way down next week, though just how much cold that will bring us is still unknown.”

The producer went on to say a lack of liquidity at Transco Station 45 is causing problems for him. “Restrictions on Transco are forcing traders to look elsewhere for transport. These pipes are causing me some serious headaches.” (Transco did lift last week’s Imbalance OFO Wednesday, and Tennessee canceled restrictions on deliveries downstream of Station 200.)

A Florida utility buyer quoting the citygate in the $8.10 area said the local market was “very quiet,” but that since much of the state was due for high temperatures around 80 degrees, some air conditioners might be cranking up.”

A couple of western sources agreed that although Waha made a substantial advance, it was rapidly falling late to $7.50 due to declining intrastate Texas load after starting around $8.00. “Some of the Texas utilities are saying it’s cheaper to buy power from others than generate with gas, and that helped weaken the Waha market,” a marketer said. However, Permian numbers stayed fairly strong because of continuing Midwest demand, he added. The marketer noted that Rockies demand was dwindling, saying, “Denver has had snow 12 out of the last 17 days, but it will be in the 60s there by the weekend.” He made one final observation: “You know there’s going to be a withdrawal [in the EIA report]. The question is, just how much?”

A Southwest utility buyer attributed some of San Juan’s strength to pipeline operational issues. He reported the purchase of a large amount of Bondad supply in two packages — more than he expected to actually need — because of doubts that all of it would flow.

In his Wednesday afternoon natural gas commentary, analyst Kyle Cooper of Salomon Smith Barney said: “Injection requirements are obviously going to be extraordinarily high before Oc.t 31 and that will provide substantial support for prices throughout the April-October period. However, bullish information must continue to enter the market to maintain these price levels…[W]e do not think the situation is the same as 2001, [when] significant demand destruction and increased supply resulted in the highest injection on record in 2001 and prices of $1.76 by September 2001. A reduction in overall economic activity, lower petroleum prices after resolution of the Iraqi situation, lower weather-related demand and increased supply could all combine to alleviate the situation much more quickly than anticipated [this year]. We are not forecasting prices to return to the sub-$2 level as in 2001 and early 2002, or even the sub-$3 level. Yet to say there is not substantial downside risk form nearly $6 on the Apr-Oct [futures] strip is also considered foolhardy.”

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