Believed

La Nina conditions — an unusual cooling of ocean surface temperatures off the western coast of South America that is believed to have significant effects on North American weather patterns — continue to develop across the equatorial Pacific, according to the National Oceanic and Atmospheric Association (NOAA).

Occidental Petroleum Corp. made a “significant” discovery of oil and gas reserves in Kern County, CA, the company said Wednesday. Approximately two-thirds of the discovery is believed to be natural gas.

The market was able to squeeze out one more day of moderate overall price increases Tuesday, but between a sharp reversal in energy futures and warming weather trends, sources don’t expect that to continue Wednesday.

Gas pipeline companies reported no significant impact on gas transportation operations from what was believed to be the largest power blackout ever last week (see related story). However, some pipelines did report sharp and sudden demand reductions because many gas-fired power plants, chemical companies and industrial manufacturing plants were shut down. As a result, gas prices plummeted and even more gas was expected to be headed into storage.

As anticipated, the one-two punch of a larger-than-expected storage injection and what is believed to be the largest-ever power blackout punished cash prices Friday. Declines ranged from about 15 cents to more than half a dollar, with a majority of points dropping 30 cents or more. Northeast citygates predictably racked up most of the largest losses.

In what was largely believed to be a follow-through from Friday’s erratic screen rise of nearly 16 cents, cash prices saw strong gains Monday that hit double digits at a majority of points and were especially pronounced in the heated West. Eastern upticks tended to range from about a nickel to a little more than 20 cents, while some western points fit within the East’s pattern and others soared by as much as 40-60 cents or more.

The cash market began what several sources believed could be a fairly lengthy period of downward price consolidation Wednesday. Numbers generally fell between a dime and 20 cents in eastern markets and at Permian Basin/Waha and Pacific Northwest points, while other western prices took an even heavier beating.

In yet another instance where bigger is believed to be better inthe deregulated energy marketplace, Boston Edison parent BEC Energyand Cambridge, MA-based gas and power holding company CommonwealthEnergy System plan to merge in a cash and stock deal. Thetransaction also represents the acquisition of gas assets byelectric BEC.

Although it is widely believed the collapse of crude oil pricescould force many producers to cut back drilling plans this year,Unocal Corp. was the first company to formally confirm ityesterday. Unocal said it will prune its capital spending by about$250 million to $1.3 billion. According to CEO Roger C. Beach thecapital expenditure reductions will come in three areas: near-termproduction projects that are most heavily affected by lower currentcommodity prices, investments in non-oil and gas businesses, andlonger term exploration projects that could benefit from more dataevaluation. The move probably will not have a significant impact onUnocal’s natural gas production, a spokesman said, adding however,some associated gas production could become a casualty in thecutbacks. No specifics were available.