The cash market again seemingly defied some of the laws of economic gravity Tuesday by rising about 20 cents or more at most points. And once again several traders were baffled at the continuing price strength in the face of pitifully few visible means of physical support.

Saying he was “absolutely shocked that we stayed above first-of-month indexes,” a Midcontinent/Midwest marketer said the market firmness must be purely technical “because it can’t be fundamentals.” Weather is chilly in many areas but still remarkably moderate compared to what it would normally be in the middle of December, he said.

With Chicago citygates soaring to the mid $2.50s, more than a dime above the NGI index of $2.42, any Midwest utility should have been selling its baseload gas to others and pulling from storage for Wednesday’s burns, the marketer commented.

However, a Gulf Coast aggregator offered some rationale for utilities holding back on storage withdrawals: “It strikes me that storage use is still slow because the January and February futures contracts [$2.803 and $2.868 respectively on settlement Tuesday] remain considerably higher than Henry Hub cash [in the mid $2.50s for today’s flow]. It’s a ‘time value of money’ thing.” He thinks the situation will hold true only as long as the January/February screens stay well above cash, and that the pace of storage withdrawals will step up quickly as soon as Henry Hub swing swaps for the rest of December come close to January futures.

A Northeast marketer agreed that the futures premiums constitute the only viable reason he can see for this week’s price upticks. It might not work that well in western markets, he said, but for traders in the East it’s “better to buy Henry Hub cash now and sell January futures.” Also, he said his company has rolled all of its storage inventory over to next winter, not intending to withdraw it this winter only to replace it next summer, unless there is a drastic change in market dynamics between now and then. The marketer said he’s aware of other trading firms with similar plans.

“Why would you bring gas [bought earlier in 2001 at significantly higher prices] out into a cheaper market?” the marketer continued. Fundamentally the market may look very weak now, “but the back end of the curve [winter 2002-03] is looking very strong.” However, he acknowledged that unless there is a long period of very cold weather between now and February, “basically we’ve got a train wreck in prices coming up.”

A producer, who confessed that the recent price bullishness didn’t really make sense to him, jested that the gas market “is just going along with the fairy tale atmosphere of holiday movies like Harry Potter and The Lord of the Rings.” In a more serious vein, he noted that unlike the late price run-ups observed Friday and Monday, Tuesday’s numbers were retreating moderately as deadline approached. That may have been a hint of reality starting to return to the market, the producer said, but it was contradicted a bit by the screen going from slightly negative at first to a few cents higher later in the morning.

A Rockies marketer said the softening trend was more pronounced in his markets, quoting Opal as dropping from a high of $2.48 down to $2.30, although it regained a bit of ground at the end. There was some incremental Opal gas being offered late, he said. “I picked up some, and then it kept coming,” with about 35-40 MMcf/d extra being available near deadline, he said.

The Rockies actually has some winter weather, unlike most of the nation, the marketer went on. Previously there had been no Rockies-San Juan spread (Opal and the San Juan-Blanco pool were at virtual parity in the mid $2.20s in Monday’s trading), he noted, but transport from the Rockies was working better Tuesday as Blanco opened a premium of about a dime or so.

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