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Oil, Gas Futures, Tighter Supplies Boost Market

Oil, Gas Futures, Tighter Supplies Boost Market

"Where has all the gas gone now?" asked a Houston-based marketer Tuesday as April numbers turned upward going into the home stretch of bidweek. He was starting to encounter some tightness of supplies in the Gulf Coast and Appalachian production areas that caused prices to be bid higher. Echoing a producer's Friday observation (see Daily GPI, March 29), the market suspected that reduced drilling budgets last year may be reflected now in a firmer gas market.

Fundamentals were even weaker than before as mild weather permeated most of the nation Tuesday, but sources cited strong increases in the crude oil and natural gas futures trading pits as supporting the rises for both April and last-of-March gas.

A Canadian producer noted, "We expected a bullish bidweek, but not as bullish as it turned out to be. As a producer, we'll take it." His Chicago citygate sales began in the low $1.80s but got as high as $1.91 in a late deal.

A marketer said Rockies prices pushed up almost 8 cents for April Tuesday, adding, "Nobody here was ready for it." A cold front is expected in the West during the first five days of April, boosting current regional demand, he said. "But after the weekend, when things warm up, storage gas starts getting cycled and some of these winter term contracts start ending, we are going to see incremental prices come off.

One trader reported buying nearly all of his Southern California border gas at GPI's index "minus anywhere from a penny to a penny and a half." But after border quotes popped up into the low $1.80s Tuesday, he was able to re-sell a package at index plus a penny.

A marketer was confounded by the fresh price strength. "Fundamentally the gas market is still very weak," he said. "We may have one more strong storage [withdrawal report] this week, but that's got to be it; it's about time to start injecting pretty soon."

Despite a general lack of heating demand, quotes for the last day of March ranged from barely higher to about a nickel up. Traders continued to cite nuclear plant outages in the West and generally strong power generation demand elsewhere as responsible for cash's bull market.

Several sources are expecting a very slow Thursday prior to the Good Friday holiday, saying many of their trading partners are looking to make April 1-5 swing deals today.

Referring to the "Melissa" computer virus that has brought many corporate e-mail systems to their knees recently, a utility gas buyer had this take: "We didn't get hit by any viruses, but the flood of messages we got [from information technology managers] about viruses may have been even worse."

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