Building on Thursday’s screen spike, forecasts of severe weather over the weekend across much of the Midwest and Northeast, and anticipation of even greater heating load to arrive later this week, cash prices made another strong surge Friday. Double-digit gains were the order of the day for a majority of points; however, Rockies quotes retreated between about a dime and a quarter.

“Welcome to volatility in 2003!” was a Gulf Coast marketer’s greeting. It’s been a “wild ride” in the first two trading days of the new year, he said, acknowledging that the major price run-up “caught me a little unprepared this early.” There may be a bit of retrenchment here and there in the coming week, but he expects the bullish streak to continue as the “really bad weather” starts arriving, adding, “Maybe I’ll be ready for it then.”

Despite a snowstorm expected to traverse his region during the weekend, a Northeast utility buyer was basically unconcerned about the short-run market. “We’re seeing average temperature readings for most of [this] week” before an arctic front is due late in the week, he said. However, he was thinking that the succeeding second and third blasts of winter predicted in a 10- to 15-day forecast are going to be even worse than the initial wave. “Everything’s wide open transportation-wise right now except for the New England pipes being restricted and keeping prices strong.” He noted that Dracut deliveries into Tennessee traded around $7, and Iroquois Zone 2 had gotten as high as $6.90, pointing out that the Waddington delivery point from TransCanada into Iroquois has been constrained lately, helping support Iroquois prices.

The Energy Information Administration said Friday morning that 123 Bcf had been pulled from storage in the preceding week. Although within the overall range of prior expectations, the volume was the second in a row that was on the low side of the common outlook following a string of withdrawal reports that tended to exceed traders’ and analysts’ guesses earlier in the heating season. Nymex responded with an initial surge of bullishness but then retreated to remain close to flat for much of Friday’s session before rallying again to settle nearly a dime higher.

Although natural gas futures support for cash dwindled considerably Friday, the ancillary impact of soaring petroleum futures was still around. Crude oil tacked on nearly another dollar and a half to wind up at a little more than $33/bbl, and heating oil skyrocketed as worries about Iraq, Venezuela and a potential cold second half of winter occupied traders’ thoughts.

The Weather 2000 consulting firm reinforced its forecast of a cold first quarter of 2003, saying the chances for four, five and even six or more consecutive months this winter of below normal temperatures “appear to be higher than ever.” It recalled three different geographic forecasts it had made in recent weeks of the best chances for cold weather in January, February and/or March: east of the Mississippi River; east of a line from Dallas to Detroit; and east and south of a curve from Houston to Cincinnati to Boston.

“Exact storm tracks, snow-cover [and] intensity of various short-wave impulses will determine which of the three scenarios will eventually be the best fit,” Weather 2000’s Friday advisory said. “Some things remain very confident: (1) Eastern half of the nation will be characterized much more by cold than by mild in the week and months ahead; and El Nino isn’t taking a “break,” as some may suggest. It never was, and never is going to, play a dominant role in making the Great Lakes, Ohio Valley, Northeast or Mid-Atlantic very mild this year.”

Despite the general bullishness, a Midwest marketer reported no trading Friday, saying he hadn’t had anybody calling for incremental gas yet in the new year. He added that a counterparty told him Dawn is looking very weak, being quoted at basis of only plus 1 cent for February.

The Rockies still lacks the cold weather demand that would help prices there keep up with the advances in the rest of the market, a producer said. Although numbers “started out pretty weak” in the region, they made a little recovery in late deals, he said. A Wind River Lateral constraint on CIG (see Transportation Notes) is fairly inconsequential, he added. “I don’t think anybody is getting cut” because the bulletin board indicated about 18 MMcf/d of capacity was still available Friday morning.

South Texas supplies could be reduced by as much as 100,000 MMBtu/d this week as Matagorda Offshore Pipeline System conducts another in a series of pigging operations (see Daily GPI, Dec. 20, 2002).

Analyst Thomas Driscoll of Lehman Brothers believes that relatively warm weather last week will likely lead to a low storage withdrawal report this week. He estimated a pull of roughly 105 Bcf versus 199 Bcf a year ago and the five-year average of 153 bcf. He also expects the year-over-year deficit to decrease from 572 Bcf currently to 478 Bcf.

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