Although the cash market’s downslide looked like it wasflattening out Wednesday in most instances except for California,sources tended to regard it as merely a resting place before moresoftness sets in. A majority of points ranged from moderatelysofter to a few cents higher, with the largest gains being realizedin the chilling Northeast. The Southern California border plungedand the PG&E citygate fell by about 40 cents.

There were several reasons to discount any chances of asignificant price rebound for the time being: a below-par storagewithdrawal figure of 81 Bcf from AGA, a very mild six- to 10-daytemperature outlook from the National Weather Service, anall-around softer energy futures complex, and other market dynamicsin bears’ favor.

Some genuine winter weather remained in the Midwest andNortheast market areas, but as a marketer pointed out, it would notbe sustained long enough to support prices. “It looks like about atwo to three day shot and out,” he said. A Chicago traderconcurred, noting that even the midweek bout with a winter stormwas not able to pick up Midwest prices significantly.

A bull’s worst nightmare is shaping up, said one Gulf Coasttrader. “We’re seeing a slow and methodical decay of the market.”Physical phenomena affecting prices have changed in the last weekor so, he said. Utilities can afford to keep gas in storage and notwithdraw since they can buy new physical gas at well-below-indexprices now, and in the process “they get brownie points from thePUCs by not emptying their accounts,” he said.

The trader estimated $4.10 is the average Henry Hub equivalent(plus transport) for injected storage at most facilities. In thatsituation storage holders can tack on nine or 10 months (into nextwinter) of carrying fees and still come out ahead, he said. “A lotproduction area storage players have started buying February spotand selling March futures, bagging 10-14 cents profit.” Withlowering demand and increasing supply, the price formula lookshorrible, the trader said, concluding, “It’s going to be a mess inMarch.”

In the last few months Florida Gas Transmission issued severalOverage Alert Day notices due to cold weather in its market area.In a significant switch hinting that winter is virtually over, FGTwas warning shippers that an “Underage” Alert Day may be necessarytoday because of mild market area weather and high linepack.

Although PG&E did not continue a customer-specific OFO intotoday, traders were anticipating one early Wednesday, according toa western marketer. That caused Malin prices to be high initiallybut they crashed later as it became known the OFO was over, shesaid. Wednesday’s Malin quotes saw a range of about $2.50.Meanwhile, California border demand fizzled as cool weather yieldedto more temperate conditions, sending border prices about $2.50lower.

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