The cash market appeared to brush aside Monday’s second straight screen dive in registering gains Tuesday that were as low as a dime at a few western points, but most often ranged between a quarter and more than 60 cents.

Sources cited a trend toward colder weather in the Northeast and Midwest, along with air conditioning load from Texas through the desert Southwest, as the primary instigators of Tuesday’s overall rally. A slew of nuclear plant outages or partial reductions across the U.S. (see reactor status report at https://intelligencepress.com/subscribers/power/nrc/) also contributed to growing gas demand.

Still, more than one trader was taken aback by the market’s strength, especially after Friday’s futures plunge of 37.5 cents was followed by one of more than a quarter Monday. Sure, said one, Nymex’s November contract rebounded about a dime Tuesday, but that occurred after most cash business had been completed. He also questioned how cash numbers could be so strong when another large chunk is expected to be taken out of the year-on-year storage deficit when the EIA makes its report Thursday morning.

“This market is very hard to figure out,” said a Midcontinent/Southwest marketer. But she recalled a long-time adage among gas marketers that goes something like this: we don’t care whether the market is going up or down, just as long as it’s moving.

An East Coast trader tended to agree, noting that price volatility was considerably greater Tuesday than on Monday. “The LDCs were out buying for the cool weather,” he said. “Thursday should be cold, with temperatures down in the 30s for lows. Probably not quite freezing, but close.”

For a Southeast utility buyer who had no trades to report, largely due to mild weather, about all she could see to explain the new surge of bullishness was that “some of that cash-screen convergence that people have been looking for a long time finally happened.” Henry Hub’s rise of about 35 cents into the mid $4.60s chopped about a quarter off the gap between it and Nymex, leaving the Hub a little more than 20 cents below November futures.

Much like on Monday, Southwest prices were rising a dime or so in late deals, a marketer said. Texas high temperatures are hitting the mid 80s, and the state’s utilities were increasing their Waha buying as a result, she said. That set up a little tug-of-war for Waha/Permian supplies because highs remain in the 100 area around Phoenix and other parts of the desert Southwest, the marketer added. “And of course the El Paso OFO [see Transportation Notes] helped boost prices.”

Another factor supporting firmness in the Southwest basins was a Wednesday-only outage of Transwestern’s San Juan Lateral (Blanco to Thoreau Segment), which is cutting lateral capacity by about 95,000 MMBtu/d (see Daily GPI, Oct. 8). And maintenance by GulfTerra Field Services at its Chaco Plant in northwestern New Mexico was due to keep flows at zero from 19 area gathering systems through Wednesday.

Increases on either side of a dime at the PG&E citygate and Malin were among the day’s smallest due to a high-linepack OFO by PG&E (see Transportation Notes). SoCalGas did not issue an OFO, but a spokeswoman said, “Check back on Friday.”

Wondering if maybe some people had misjudged how much impact a cold front would have, an Upper Midwest marketer said Monday’s high had been 77 degrees, and “today [Tuesday] it’s in the 50s.” She said the region will see a brief warm-up to the 60s before the weekend, and then it’s back to the 50s. Meanwhile, a utility buyer in the Lower Midwest said his city was basking in 83-degree warmth Tuesday afternoon, “but it will be quite a bit colder starting Saturday.”

Analyst Thomas Driscoll of Lehman Brothers said colder weather last week (59 HDDs, or heating degree days, compared with 34 HDDs the previous week) led him to forecast a storage injection of 70 Bcf in the upcoming EIA report.

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