The swing market was experiencing only mild aftershocks Thursday following the major earthquakes earlier in the week. Except for some gains in the Rockies, the price path remained downhill everywhere else but the slope was getting less steep. The calm-down was welcomed by traders, since it lessened the stress of price hyper-volatility and also allowed them to focus more on March bidweek business.

Price direction signals for the weekend (also the beginning of the March aftermarket) were somewhat murky. Temperatures were starting to moderate Thursday in the lower reaches of the South, but according to The Weather Channel, on Friday a new winter storm system will be shooting eastward from the Texas/Oklahoma region into the Mid-Atlantic. In the Midwest, temperatures have gotten milder but remain below average, and a new arctic air mass will be descending into the Upper Plains Saturday. The Northeast is getting a little break from previous conditions, but some wondered whether it was enough to reduce demand by a meaningful amount.

April futures eked out a 9.5-cent advance in their prompt-month debut, failing to show much interest in an essentially neutral EIA report of 154 Bcf in storage withdrawals last week. The crude oil and heating oil contracts registered moderate drops, but only after crude had advanced to just a penny shy of $40/bbl at one point during the day.

“I don’t know what to expect when I get back in the office Friday,” said a Northeast utility buyer. She was hoping that the softening trend would continue, but said she was already seeing Dominion South Point offered for the weekend at $15, nearly $5 above Thursday’s average, “so it looks like somebody’s trying to push things back up.” The buyer reported having seen Dominion North Point being offered at $50 early in the week, “but obviously nobody took that.”

One sign of gradually returning semi-normalcy in the market was a few more pipelines lifting restrictions to some extent (see Transportation Notes). A Rockies trader said that although CIG and Public Service Co. of Colorado had already lifted OFOs or similar constraints, enough cold-weather load remained to account for the region’s relative firmness. It was snowing in Denver and many other parts of the Rockies Thursday, he pointed out.

A lot of March trading got deferred by the hectic nature of the swing market Monday through Wednesday, but it started being made up Thursday. A western trader found bidweek numbers trending downward, quoting a Thursday PG&E citygate deal in the low $7.00s compared to his previous $7.25-50 range.

A producer said Chicago traded at $9.03-08 for much of the day but was up to $9.10 late. MichCon was finally starting to trade at fixed prices, he added, saying, “It looks like $9.50, $9.55 and $9.60 got done this morning [Thursday] and [the citygate] is now well offered.” The producer thought a lot of people are going into the month short at Chicago and in the Upper Midwest. “I don’t think people are ready for a cold March, especially at Dawn and MichCon. You are seeing a reflection of the storage situation in MichCon in its price [at such a premium to Chicago].”

A marketer had more to say on Midwest storage: “Michigan has been running $2.00 over Chicago in the day market. The storage situation up there is really bad. Once they [Michigan] are out of storage, they’re dead. Do you remember what happened in 1996? They’ve been pulling on storage pretty hard and they can’t do that for very much longer. Eastern Canada storage is at less than 23%. The weather forecasts are calling for them to be cold for the next 15 days, until mid-March, and next week looks like it could be as cold as this one. Things are really not looking very good.”

Speaking of the sky-high early-week prices, the marketer made a grim prediction: “There is going to be blood on the streets because of this.”

A producer made this observation about Wednesday’s expiry of March futures: “The NYMEX settlement ranged from $8.60 to to $9.60 during the last half hour of trading, and [somewhat sarcastically] that is just outstanding. These numbers are so huge that even in a physical basis trade, one could easily end up being 50 cents out of the market. So we have the basis market leery and the physical market leery, and nothing is really getting done except index deals. Basically the market was paralyzed.”

A Gulf Coast producer failed to discern much bidweek excitement Thursday. “We are pretty much done, only a little balancing left. Prices are still dropping, so no one should be buying index. Many traders have decided to buy swing gas, just to settle their books. We are just about done stabilizing our position.”

“The coming shoulder months could determine the cost of gas for the foreseeable future,” said an eastern trader. “Where March is going all depends on how the market reacts to the supply shortage hype. The weather will factor in too. The first 10-15 days of March are looking fairly cold. But while these are some very bullish signs, I think the supply hype is already built in, so we shouldn’t have to worry about prices rising any more, just whether they will stabilize where they are.

“Prices are strong for the rest of 2003; looking at the [Nymex] strip going out, prices are up in the $5.00s though November. A hot summer could mean we don’t see price relief for at least a year. I called a 150 Bcf withdrawal [in the storage report]; not too bad being only 4 off. Shouldn’t I get some sort of door prize? There is 1,014 Bcf left in the ground and five reports left in the typical withdrawal season. Estimating base gas at 500 Bcf, we have to average 100 Bcf or less for the last five weeks. And with the decreasing rig count, all these are bullish signs.”

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