The Rockies remained the last bastion of rising prices Thursday with gains on either side of 30 cents for CIG and Questar and about a quarter for Kern River and Northwest. Otherwise the cash market found it had already milked the last drop of price strength from a return of cold weather in the East. Even the Southwest basins, California and intra-Alberta joined eastern points in price movement that ranged from flat to down about a quarter in most cases. The Northeast again led the way downward with even bigger losses that ran as high as about 70 cents at the Algonquin citygate.

Several sources referred to the extended period at which cash prices have traded at substantial premiums to futures as sufficient rationale for the cash softness despite severe winter conditions continuing to pervade most of the East through at least Friday. As one put it, “Gulf Coast cash has been hyped and trading so high over the screen, and this can’t go on much longer.” More convergence is needed, he said.

Henry Hub’s drop of about 15 cents into the high $6.00s Thursday combined with the March futures gain to $5.828 to leave their spread at approximately a quarter.

The Energy Information Administration reported that 208 Bcf got withdrawn from storage last week. The volume was at the high end of prior expectations and widened further the year-on-year deficit. After some hesitation, Nymex acknowledged the report’s bullish nature by sending futures to an eventual advance of a little more than 18 cents.

This left a tough call on Friday’s price direction for some traders. The EIA report and subsequent Nymex response argued for firmness, one pointed out. On the other hand, upcoming moderation of eastern cold and the demand slump accompanying a weekend had others thinking softer. As an eastern utility buyer summed up, “Whether prices go up or down, I don’t think they will move very far from flat.”

Thursday’s numbers dropped a little early on, then rallied after the EIA report, but very little trading was left to be influenced by then, a Gulf Coast marketer commented. “In my experience with Houston traders, nearly all of them get finished by 9:30 Central [when the storage report gets issued],” he said. “They don’t want to get caught up in any adverse price movement that follows the report, preferring to wait until the next day to express storage opinions through their trading activity.”

Analyst Thomas Driscoll of Lehman Brothers estimated that next week’s storage report will show a withdrawal “of roughly 160 Bcf versus 172 Bcf one year ago and the five-year average of 126 Bcf…We expect the year-over-year storage deficit to decrease from 811 Bcf as of Jan. 31, 2003, to a deficit of 799 Bcf (estimated withdrawal of 160 Bcf versus a withdrawal of 172 Bcf one year ago) for the week ended Feb. 7, 2003.”

However, the Gulf Coast marketer is looking for an even bigger withdrawal volume next week than the most recent 208 Bcf. He based his supposition on the belief that even though this week’s blast of cold wasn’t as severe as those in late January, the higher prices it engendered continued to tempt suppliers and utilities to pull their storage supplies for different reasons: profiting from the high prices by the suppliers and avoiding the high prices by the utilities.

A Northeast utility buyer said regional temperatures would ease a bit Saturday and Sunday but still be near freezing. Then the weather will get colder again by next Tuesday and Wednesday, which he said might generate a fair amount of Monday-only deals Friday because heating loads might already be rising substantially on Monday. For that reason, he expects to see some Northeast citygate quotes remaining on the high side of $7 Friday.

“The storage report was no big surprise to me,” a Midcontinent marketer said. “We were expecting a 200 Bcf withdrawal, so the EIA’s 208 Bcf was no big deal. It seems like they have got their act together. The EIA hasn’t had a truly questionable storage report for some time. Maybe they are getting better. Who knew?”

Although temperatures are staying mild in the Southwest and along much of the West Coast, it is below freezing from the lower Rockies northward. That and continuing Opal supply shortfalls from Jonah Field kept Rockies numbers from succumbing to the overall softness, one source said.

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