A solid blast of cold, wintry weather and a technically bullishfutures screen produced tremendous price increases and enormousprice ranges nationwide last week. On Friday, there was little onthe horizon to change the current market picture other than thenormal weekend decline in demand.

According to the National Weather Service Friday, the cold northwind should be camped out across most of the country for the nextcouple weeks. The latest six to 10-day forecast shows below normaltemperatures across the entire country east of California exceptfor the northern Plains, which are expected to see normal (cold)temperatures. The NWS’ eight to 14-day outlook shows some relief inthe form of normal temperatures over the Rockies, Pacific andPacific Northwest regions, but more of the same (below normaltemperatures) over the rest of the country.

Nevertheless, buyers got a little relief on Friday fromThursday’s price peaks, which in many cases were 75 cents to $1.50more than bidweek price levels. Most points in the Gulf Coast,Midcontinent and Midwest lost 10-15 cents on Friday, while WestTexas and Rockies prices backtracked more than a quarter in somecases. Southern California prices lost about a dime, while pricesin Northern California fell 15 to 20 cents. Malin and PG&ECitygate prices, however, still are about $1.30-$1.60 more thanNovember bidweek levels.

People were “on edge” late last week because of the possibilityof an OFO on PG&E due to low line pack, said one observer.”They pulled 700 million out of storage, and that’s just unheardof.” On Friday PG&E reported that it expected the tightest dayyet during the week for supply and demand with a total of about 3.5Bcf/d of demand and a required net storage withdrawal of about 765MMcf/d (51% of the maximum withdrawal rate). Demand was expected todecline over the weekend and to be about 120 MMcf/d lower by Mondaymorning, but it still was expected to be near the highs of theprevious week.

“I tell you what, this market is crazy,” the observer said. “Itended up that most people were short today, and there was no gas atthe end of the day, so those who needed it paid dearly.”

The sharpest daily drops of 35 to 60 cents were seen in thePacific Northwest, which had experienced some of the largestincreases on Thursday and throughout the week. On Friday, prices atSumas, Stanfield and Kingsgate were still about 90 cents to $1 morethan where they started the week on Monday.

Helping provide some relief from Thursday’s peak prices out Westand in Canada was the announcement by Alliance Pipeline last weekthat it would be delaying commercial service until the end ofNovember from its expected in-service date of Nov. 13 (it alreadyhad been delayed from Oct. 1).

“I think the Alliance delay has had an impact in Alberta,” saida Canadian producer. “Gas is backed up and prices are dropping.Nova has changed tolerances and isn’t letting people pack the pipe.Alberta prices are around $7.17 after reaching highs of $7.75 onThursday. But as a producer, can I really complain that gas pricesare falling to $7 from $7.75? Well, not really.”

Meanwhile, Northwest Pipeline finally called an OFO afterwarning shippers throughout most of last week. Primary nominationsflowing north through the Kemmerer Compressor Station on Fridayexceeded available capacity at that point because of a shortfall indisplacement volumes.

The situation in the East still was quite a contrast to the Weston Friday because the cold front apparently lost momentum en routeto northeastern markets. “People were just trying to give away gasat [Transco] Zone 6 gas and Tetco M3. It was crazy,” said onemarketer. “We traded most of the day at Zone 6 around $5.46 to$5.51; that’s down from $5.72 average Thursday so we’re off quite abit. The Northeast spreads traded today somewhere between about 25cents to 29 cents over the Henry Hub. The spread has been weak thewhole week.

“Don’t get me wrong; prices are extremely high and we’re notcomplaining. The forward market spread looks quite strong. Decemberforward prices for Transco Zone 6 New York are trading $1.20 onpaper and 38 cents on the index so about $1.58 physically over thehub. That’s pretty strong.”

Because the Northeast escaped the cold weather that swept mostof the rest of the country last week, it was a good opportunity tostore a few more molecules of gas for the winter given the largeprice spread most of the week between current cash prices andDecember futures. Net storage injections are still taking place inthe Northeast, the marketer said. “I think next week we could see a7 to 10 Bcf injection in the Eastern Consuming Region [in the AGAreport]. But out West they are seeing big time withdrawals and thatcould pull down the total to a point where we see net withdrawalsfor the first time this year. We’ll have to wait and see. The folksin the producing region probably were injecting as much as theycould earlier during the week.”

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