There was decided regional divergence in Tuesday’s swing pricemovement. The Gulf Coast and Appalachia/Northeast, being the areasstill affected most by unseasonably warm weather, ranged from flatto down as much as a dime. But from the Midcontinent westward,where it actually seemed a bit winterish behind a cold frontheading east, prices were flat to a few cents higher, with theRockies, Southwest basins, California and intra-Alberta seeingincreases of about a nickel or more.

The opposing changes caused a flip-flop in basis relationshipsas the Rockies and Southwest tended to trade even with or abovemost Gulf Coast and Midcontinent points.

The eastern price drops were mostly on the mild side, likely dueto the approaching cold front. However, some forecasters thoughtthe front might be weakening considerably by the time it reachesthe East Coast.

One source suggested CNG’s small increase may have run contrary togeneral softness in the Appalachia/Northeast region because thepipeline started to enforce an OFO requiring more deliveries north ofits Valley Gate Junction (see TransportationNotes).

Contrary to the high-linepack alarms being sounded by manyeastern pipelines, California prices likely got an early boost dueto concerns that PG&E might issue a low-inventory OFO, sincethe utility had been projecting low linepack since Sunday, amarketer said. Quotes settled back a bit after no OFO materialized,he said.

“Turkey is not the only thing getting stuffed this weekend,” onesource told Daily GPI. She was referring to the deluge of declaredand/or expected pipeline OFOs to guard their systems againstexcessive linepack. The situation is expected to depress pricesgoing into the holiday weekend, particularly in the East.

However, most traders gave little credence to speculation thatOFOs might cause weekend shut-ins by producers with few or nooptions on where to take their gas. With many Gulf Coast pointsstill in the vicinity of $2, one producer saw virtually no chanceof shut-ins at that high a level. “My CEO would have my head on aplatter if I suggested such a thing,” he said. “We [producers]likely are going to have to accept lower [weekend] prices, but Idon’t expect any of us to shut in gas.”

A marketer considered the shut-in potential from OFOs asoverhyped, noting that Henry Hub was already trading Tuesday forthe weekend at $1.86-91, representing a drop of a dime or less fromyesterday’s levels. “The revenue stream for producers is muchstronger now than in the past because of crude oil priced over$26/bbl,” he said. “Due to that, they could probably afford to shutin some gas, but I don’t think they will.”

Harking back to the Gulf Coast’s price collapse to $1 or less inthe first week of December 1998, the marketer asked, “Why wouldn’tthat happen again? After all, the market scenario is worse thistime with more gas in storage and very little weather demand.” Hethen answered his own question, saying lessened gas deliverabilityis the key difference between now and last year. Any tendency for asimilar collapse in 1999 would be arrested by the quick tighteningof supplies, he concluded.

Western sources dismissed most OFO concerns, noting the colderweather in the region. “We’ll be watching out for them [OFOs] onSoCal Gas and PG&E, but we’re not too worried,” one tradersaid.

December bidweek numbers looked a little lower Tuesday than theyhad the day before, but not by much, a marketer said.

An eastern trader commented, “I’m not sure if the Decembermarket even got started [because] it seems to be finishing soquickly.” He was among many who either had completed Decemberbusiness Tuesday or expected to do so today. However, he said,undoubtedly there will be utilities still out shopping for gas nextMonday and Tuesday. “They’re not going to buy this far ahead of thenew weather forecasts that will be available at that time,” thetrader said. They will still have swing gas options even ifsuppliers have already committed most of their baseload, he added.

A buyer reported making intrastate purchases in East Texas at$2.11-13, which is about 80 cents under the region’s November LoneStar index. Declines appear to be smaller in the West, as onesource reported deals around $2.30 at Malin (down about 70 cents)and on either side of $2.20 at Stanfield and Kingsgate (also downabout 70 cents).

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