Above

Prices dropped again at nearly all points Thursday as normal to above-normal temperatures in many areas and prior-day futures weakness continued to weigh on the cash market. As on Wednesday, though, there were a few flat to about a dime higher points that kept price movement direction from being universal.

Although spot market natural gas prices have significantly declined, the prices of gas futures contracts remain well above the long-term price forecast and historical average prices of Fitch Ratings, analysts said in a Wholesale Power Market Update. Over the next 12 months, Fitch expects gas prices to fluctuate between $6 and $10/MMBtu. Longer-term, prices are forecast to average between $5-6/MMBtu.

Lack of above-normal temperatures and tropical disturbance development tied with weakness in the petroleum arena allowed natural gas futures on Monday to continue to explore the downside. After reaching a low of $6.710, September natural gas wound up staging a minor rally in closing out the day at $6.913, still down 35.6 cents from Friday.

Recalling its notice earlier this month advising shippers that working storage inventory levels were significantly above levels for a comparable period last year and there was a distinct possibility of running out of available capacity by mid-summer (see Daily GPI, May 12), Southern Natural Gas said Wednesday it was implementing immediately the restrictions on certain storage transactions that the notice had said might be required to preserve firm storage obligations and interruptible storage quantities that already had been accepted. See the bulletin board for details of the restrictions now in effect on interruptible storage nominations. The pipeline emphasized that “firm storage transactions are NOT being restricted.”

In an interim update Tuesday, ConocoPhillips said higher production in the Lower 48, Australia and Venezuela won’t be enough to lift 1Q2006 production on a boe/d basis above output in the final quarter of 2005. The Houston-based producer also said it expects crude prices to be higher than in the previous quarter, up to $61.75/bbl from $56.90, while natural gas prices will drop to $9.01/Mcf (Henry Hub) from $13.

Cash prices jumped above $8 again in the Northeast on Tuesday and most spot points nationwide posted solid gains for the second day in a row as colder weather and short-term forecasts of below normal temperatures across most of the nation put the massive gas storage surplus temporarily on the back burner.

Rainfall running almost 165% above normal so far in 2006 has triggered land movement between Washougal and Willard in the Blue Lake area of Washington state at approximately Mile Post 1192, Northwest said Friday. “Strain gauges installed in this segment have registered steady increases in stress on the pipeline in this area,” the pipeline added. “Although the stress levels require remediation soon, they are not such that immediate action is needed.” In order to ensure safety and reliability in this segment, Northwest plans to blow down and excavate the affected area to reduce line stress. It anticipates there will be no physical flow through the area for Wednesday’s gas day. “Based upon current weather forecasts and operating conditions, Northwest does not anticipate primary impacts to customers. Northwest will work with its interconnects and use its Jackson Prairie inventory in an attempt to eliminate customer impacts. However, if net nominations north through the Washougal Compressor [Station] increase significantly over the currently scheduled volume of 386,000 Dth/d, Northwest may be forced to declare a Deficiency Period. Customers can help mitigate market impacts by buying gas at Sumas,” the pipeline said. For the Feb. 22-24 gas days Northwest will only schedule primary nominations north through either the Roosevelt or Washougal Compressor Stations. If the stress on the line accelerates, remediation work may begin earlier than currently planned, it said. A Stage II entitlement remained in place until further notice.

After encountering support just above the important $10.650 level in morning trade, January natural gas futures rallied higher in the afternoon, before expiring at $11.431, up 40.9 cents for the day. The $10.650 level marks the top of the Hurricane Katrina gap on the perpetual chart.

PG&E’s California Gas Transmission system has declared a customer specific operational flow order for Tuesday’s gas day. System inventories are expected to rise above normal operating limits. The pipeline had a Stage 3 systemwide OFO with a 10% tolerance in place on Saturday.