Volatility was starting to build in the cash market again Thursday as nearly all points recorded sizeable losses. Triple-digit declines occurred in a variety of disparate markets: Northeast, Midwest, Pacific Northwest, Western Canada, San Juan Basin and California (Malin and PG&E-Topock), and at isolated points such as Dominion and Northern Natural-Ventura. Numbers for the Gulf Coast, Midcontinent, Rockies and Columbia-Appalachia production area, along with the Southern California border and PG&E citygate, tended to range from barely lower to down about 85 cents or so.

The same factors that caused Thursday’s softness were expected to remain in play Friday, prompting sources to predict further price falls for the weekend.

As a Gulf Coast marketer perceived the situation, cash prices were trending downward as trading went on, so that, a weak screen and forecasts of moderating weather in most regions all pointed more softness Friday. Throw in the usual demand slump over a weekend and further price falls become a virtual certainty, he said. “Of course, all bets are off if the U.S. is making war against Iraq when traders get to their desks that morning [Friday].”

A Northeast utility buyer concurred, noting that besides the prospects of warmer weather this weekend, “the pipeline restrictions are gradually melting away with the snow.”

Drops at Northern Natural’s demarc and Ventura points, down about 85 cents and a little more than $1.50 respectively, were among the Midcontinent’s largest losses after the pipe lifted a long-running System Overrun Limitation notice for all market-area zones.

About 200 MMcf/d is off the market temporarily in South Texas due to the discovery of a pinhole leak southeast of Houston on Florida Gas Transmission (see Transportation Notes). “Everything upstream of Station 4 is shut in on FGT because the 22-inch line [on which the leak occurred] is the only one through Station 4,” a marketer told NGI. He had 5 MMcf/d affected, but said there was no problem at all in re-sourcing the gas. He didn’t expect a significant price impact from the leak, but said FGT’s nominations system indicated that a little more than 200 MMcf/d had been flowing in the segment upstream of Station 4 for Wednesday’s gas day. MOPS, Magnet Withers and Crosstex were the FGT receipt points affected.

The marketer was among the many anticipating more softness Friday, saying he had followed up an early Texas Eastern East Louisiana deal with a later package in the mid $7.50s, “and it got even lower after that.” He also bought FGT Zone 3 at $7.50 but wished he had waited until later, thinking “I might have gotten it closer to $7.00 then.”

A Florida utility buyer said he felt fortunate not to have bought any FGT Zone 1 gas since it likely would have gotten cut by the leak shut-ins. “I did get a small amount cut in Zone 2, but I’m not sure if it was related to the leak.” For the time being Zone 1 gas, which is usually cheapest on the FGT system, won’t be available, he said. The buyer provided a further signal of weekend softness, saying that after buying Zone 2 gas from the $7.60 area (late) to the mid $7.90s (early), he had gotten a very late Zone 2 offer for Friday flow at $7.30, but he had already taken care of all his company’s needs by then.

The EIA said 176 Bcf was withdrawn from storage last week, a volume that tended to meet most prior expectations but which Nymex treated as bearish. Analyst Thomas Driscoll of Lehman Brothers offered this commentary: “Over the past four weeks, weather-normalized storage withdrawals have averaged 3.5 [Bcf/d] stronger than five-year averages. If recent injection trends were to continue, we estimate that we would exit March with about 550-575 Bcf of gas in storage. However, we expect the recent ramp-up in prices to lead to a demand reduction of 2-4 [Bcf/d] and a March 31…level of about 650 Bcf of gas in storage. We estimate that recently announced shut down /idled ammonia plants account for nearly a 1 [Bcf/d] reduction in demand in March. Our tables reflect 3 [Bcf/d] of demand destruction for the month of March. The next few storage data points will be critical in determining the direction of summertime pricing and refill rates. We continue to believe that intermediate term gas price expectations are likely to rise as a result of strong near-term pricing and that gas producers’ [stock] shares will benefit.”

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