With bottom-end temperatures in the teens and 20s predicted for Tuesday in the East and some parts of the West, while lows approach zero at some locations in Western Canada and a little south of the U.S. border, the cash market found plenty of heating demand to bolster prices by large amounts at nearly all points Monday.
Small losses of about a nickel at Sumas and Westcoast Station were exceptions to overall upticks ranging from about a dime to the $2.55 area (The Florida citygate was somewhat out of step with the general market in claiming the biggest gain by far; the next largest was a little more than $1.40 at Transco Zone 5 in the Mid-Atlantic).
The forecasts of widespread cold weather this week apparently began to impress Nymex traders more bullishly Monday. January futures rose less than a penny last Friday, but will certainly provide more support to Tuesday’s cash market after having begun the week with a surge of 13.9 cents (see related story).
Transport constraints contributed to the Northeast’s price strength. Tennessee had already implemented an Imbalance Warning in downstream Zones 5 and 6, while Algonquin and Maritimes & Northeast joined affiliate Texas Eastern in asking customers to either run positive imbalances or at least refrain from creating negative imbalances starting Monday.
The South was not lacking for strong heating load either. Two pipes with the region as their primary market area — Florida Gas Transmission and Southern — had either an Overage Alert Day or Type 6 OFO in place Monday to guard against negative imbalances as Tuesday lows from the upper teens to the mid 20s were predicted for an arc ranging from the Carolinas through Georgia southward to Jacksonville, FL, and westward into parts of Alabama.
The pipeline situation was a bit more mixed in the West. While El Paso said customer response was sufficient to reduce its linepack to “acceptable levels and allow cancellation over the weekend of a warning of a Strained Operating Condition due to high linepack, NOVA said its supply-demand imbalance created the potential for a tolerance change becoming necessary Monday due to low linepack. However, it did not make the change.
Henry Hub, which rose just shy of a quarter on IntercontinentalExchange (ICE), still recorded a big drop in ICE-traded volumes, from 909,000 MMBtu Friday (when the price fell about a nickel) to 715,300 MMBtu Monday. But ICE found that the Chicago citygate, which was up about 35 cents as the area anticipates snow and a mid-20s low Tuesday, barely budged in activity, increasing from 1,043,200 MMBtu to 1,093,800 MMBtu.
Noting the high-linepack issues of the East Coast pipes and a couple farther to the south of his service area, a utility buyer in the South said there seemed to be no such problem for pipes serving the western end of the South and the Midwest. Instead, those in the central U.S. still seemed to be wrestling with an excess of on-system supply, he said, “but this kind of weather will help clear them up” in that area. That better happen quickly, he said, because his utility should be getting closer to “normal” conditions again by the end of the week.
The recent price run-up has been quick and dramatic, the buyer continued. He reported having bought into Gulf Coast pipes such as TGT and Trunkline in the $3.50s last week, but Monday’s numbers were nearly a dollar higher than that.
The major shifts in temperatures are causing some big fluctuations in storage pull volumes, he continued. He remembered one day recently when the utility needed to withdraw only 10,000 MMBtu, but a much colder succeeding day ratcheted the daily draw up to 105,000 MMBtu.
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