Prices surprised more than a few traders Friday by staging a moderate rally in the face of weakening weather fundamentals and the industrial demand slump that accompanies a weekend period. A few scattered points were essentially flat, while increases ranged from as little as 2-3 cents to about a dime.

A couple of traders mentioned a tropical low-pressure system that was nearly half-way across the Atlantic as a potential price booster, but as one put it, “The main thing was the strength in oil futures.” The crude oil contract for September soared nearly two dollars to more than $32/bbl on news of what was believed to be a sabotage-caused fire on a gasoline pipeline in Iraq. That raised new concerns about world supplies as the U.S. heads toward winter with petroleum stocks about 10% below year-ago levels. Heating oil futures also posted huge gains Friday.

“The natural gas futures advance [nearly 16 cents] was actually kind of puny in comparison with the action in Nymex’s oil pits,” said a Calgary-based producer. He had heard reports of some dual fuel-capable users switching back to gas recently because of gas spending some time at prices under $5, and said that process was likely to accelerate “if crude stays up there near 32 bucks a barrel for awhile.” He noted that Calgary-area high temperatures were around 32 degrees Celsius Friday (about 90 F.), which was “unusually hot,” but would cool off a little over the weekend.

Another Canadian producer cited “following the screen” as the influence that pushed intra-Alberta numbers into the high C$5.30s, although she hadn’t expected the overall price run-up. “I was expecting a little more beating down of the market” instead, she said.

“More buyers than sellers?” was a Midcontinent marketer’s somewhat facetious reply when asked why weekend prices were higher even with relatively light weather-related load in much of the East. But he also mentioned the crude spike as the primary driver of the gas market and added that a lot of stop orders got hit in both crude and gas futures Friday. “It’s all technical as far as we’re concerned,” he said, observing that the market otherwise was “staying very quiet” following the end of bidweek.

Slow-moving cold fronts and their associated precipitation are expected to keep Northeast and Midwest temperatures below average at least until next weekend. Hot forecasts were in place for the lower South through the Midcontinent and southern Plains states, but rainstorms are due to keep conditions moderate in the upper reaches of the South. Meanwhile, most of the West is staying hot, but the areas of triple-digit temperatures had receded substantially from earlier in the week, especially in the Pacific Northwest.

Although the National Hurricane Center said there was no tropical activity in the Atlantic to report Friday, The Weather Channel said a tropical low midway between the Cape Verde Islands and the Lesser Antilles “does not have much in the way of showers and thunderstorms with it due to shearing easterly winds and drier surrounding air.” However, it added that the development environment may soon improve and that the formation of Tropical Depression Eight was possible over the weekend. In addition, “a new system has just moved off of Africa and is nearing the Cape Verde Islands,” TWC said. “At this point it seems to have a broad circulation with it, but mainly consists of mid-level clouds.”

Citigroup analyst Kyle Cooper said his initial estimation for this week’s storage report is for an injection near 80 Bcf. That would compare with a year-ago build of “just 33 Bcf” and a five-year average of 51 Bcf.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.