Prices Soar on Futures News; Some Points Hit $6

The huge price run-ups that had been predicted for Thursday materialized on schedule with double-digit gains across the board. Most increases were 30 cents or greater, with citygate quotes for Florida, Pacific Gas & Electric and several Northeast points touching on the high side of $6.

Skyrocketing natural gas futures had provided much of the cash momentum Wednesday afternoon, but Thursday it was the turn of traders in the crude oil pit at Nymex to give things an extra push. Escalating violence in the Middle East caused the November crude contract to be bid up by $2.81/bbl, barely clearing the $36 hurdle. Heating oil futures also were extremely strong with an advance of 5.95 cents/gallon.

Gas futures seemed rather tame in comparison, rising "only" a little more than 12 cents. But the gas market had to take into account that except for some cold, wet conditions in the northwestern quadrant of the U.S., what is often called "Chamber of Commerce weather" dominated elsewhere.

Gas was up primarily on the basis of crude price strength, said a Houston trader. "This is basically a CNN market; there's no fundamentals or technicals involved. Every [trading] shop has their TV on CNN watching the Middle East news scares."

Some sources were starting to question the validity of storage worries in driving gas prices higher. A couple reported suspicions that some entities, particularly in the Gulf Coast producing region, might be underreporting their injections to AGA. One went so far as to say he expects AGA to make an upward adjustment to Wednesday's 62 Bcf figure, either before next week's report or incorporated in it.

Much of the refill shortfall appears to be in the producing region, a marketer said, "and everybody I know is injecting as fast as possible in the Gulf Coast." He also noted that not all storage users participate in AGA's survey, which makes definitive numbers impossible. "But you can't trade from that perspective [what you suspect about storage]; you have to trade with what the market gives you," he concluded.

A Midcontinent trader agreed, putting it colorfully: "You've got to take the market cards that you're dealt and play them." He also added a thought about non-participation with AGA. "Are the ones not in the survey your Exxon Mobil or Atlanta Gas Light types, or are they more the small independent producer or small-town municipal LDC?" That would make a big difference in the significance of AGA figures, he said.

Predictably, Thursday's smaller increases of less than 20 cents included Canadian-related points Sumas, Kingsgate and Stanfield, which were subject to the ending of maintenance constraints on TransCanada-British Columbia that allowed an estimated 400 MMcf/d of Alberta gas to resume flows into PG&E Gas Transmission-Northwest. In turn, intra-Alberta numbers rose to either side of C$7.00 based largely on screen strength, a Calgary trader said.

Malin, the Southern California border and San Juan Basin were other markets failing to rise as much as 20 cents. Even with a unit at California's San Onofre Nuclear Generating Station going down over the weekend for refueling and joining a sizable list of nuke outages in the West, it's not making much impact on gas prices, an aggregator said.

A marketer said he was able to buy Texas Eastern-South Texas supply as low as $5.23 and could have gotten more "but I didn't have enough capacity." Market-area demand on Texas Eastern was dying quickly with moderating weather, he said, and that was pushing back gas into the southern terminus in the production area.

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