More than one trader was surprised Friday when prices rallied byvarious amounts at most points. With more OFOs disappearing (see Transportation Notes), milder weatheralmost everywhere and the typical weekend drop in demand, it seemedreasonable to expect further softness, they thought. Instead, themajority of markets ranged from flat to about a half dollar higher.

There were exceptions, of course. San Juan Basin and theSouthern California border fell in response to the continuing mildweather that had set some date-specific high temperatures recordsin some California cities last week. And both of Transco’s Zone 6pools, along with Algonquin in the Northeast, kept retreating fromthe stratospheric heights seen just before the New Year’s weekend.

MichCon numbers continued a remarkable comeback from theseverely discounted levels of December that had citygates tradingwell under Midcontinent field prices. While still trailingConsumers Power deliveries, the spread narrowed to about 20 centsFriday as MichCon gained nearly 90 cents for Friday’s largestincrease. One source offered two reasons for the MichCon rebound:First, during most of December the LDC implemented restrictionspreventing any gas from being delivered off-system in order tomaintain its pressure, but that restriction has been lifted in thenew year. Second, MichCon’s December liquidation of Parking andLending deals that it had made earlier in 2000 has ended.

Traders offered several rationales for the weekend price hikes,but the most popular one was a re-thinking of storage concerns.Cash traders seemed rather blasé in sending most pointslower in the wake of AGA’s big withdrawal figure on the previousafternoon, a Midcontinent source said, “but storage worries werethe main booster of prices today. Just normal winter weather fromnow on is going to create a huge squeeze when storage startsrunning low towards March.”

He and others agreed that two sucessive days of screen strengthalso helped support cash. In addition, they said, a lot of peoplesaw that prices had gotten well below indexes and figured, “Webetter get it while we can.” And even with warmer weather havingarrived, a Gulf Coast marketer said, there’s still some demand forphysical gas because it’s still cool to cold in most markets. Hesaw some load developing from traders trying to cover shortpositions before prices returned to index levels. Virtually allpoints were still below index as of Friday, but some weren’tmissing by much.

Sumas quotes returned to slightly above domestic levels onNorthwest Friday after having traded at a discount earlier in theweek. It was a remarkable return to approximate market equilibriumafter Sumas registered a premium of nearly $40 as of Dec. 8 tradingfor weekend flow. A marketer had expected Sumas to be softerFriday with Northwest shedding its Declared Entitlement, but saidit ran higher along with the screen at mid-morning.

Sources still considered it a quiet market in the early days ofthe year. As one observed, “With all the California mess and thehectic trading during December, I think just about everybody hopesthat the gas market will stay relatively calm for at least a whilelonger into 2001.”

©Copyright 2001 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.