Cash

Getting no signals from the futures trading pit, thelate-January cash market saw mild softening Tuesday. With snowyconditions covering the northwestern quadrant of the U.S., Westernpoints again tended to be flat to off no more than a penny or two.However, they were joined in small dips by several Gulf Coast andMidcontinent pipes, and Michigan citygates even managed to eke outmodest gains.

Low commodity prices have driven Bartlesville, OK-based PhillipsPetroleum Co. to cut 1,400 jobs and costs and increase availablecash flow in 1999. “We don’t anticipate margin improvements in thenear term, therefore we are adjusting our plans accordingly,” saidCEO Wayne Allen. “The changes will impact our level of operatingcosts, staffing requirements and capital spending. We are takingthese steps to improve our financial performance and create valuefor our shareholders.”

Traders returned Monday from a long holiday weekend to find thecash market about as weak or even weaker than it had been prior toChristmas, depending upon the market area. A warming trend andsofter futures were cited as reasons. The Gulf Coast, last week’sbargain basement region for gas, was only dropping a nickel to adime. But Western points, which had been riding high on the basisof having the nation’s chilliest weather, fell anywhere from about20 cents (PG&E citygate) to as much as 50 cents (Stanfield).

As expected, Christmas Eve was pretty much a non-event in thecash market. Virtually all holiday weekend business through todayhad been taken care of Wednesday, and though a number of tradersdid put in brief appearances at the office Thursday, they didlittle more than check what futures was doing in an abbreviatedtrading session. “We had to come in for the first half of the dayor else count it as a whole vacation day,” one marketer commented.

The cash market has plenty of fundamentals to deal with goinginto the Christmas weekend. But despite widespread freezing weatherand a profusion of actual and/or potential pipeline OFOs (question:does a Strained Operating Condition mean CIG has a hernia?), priceswere unusually bearish Wednesday in light of what many wouldconsider bullish conditions. Most declines were in the neighborhoodof a dime, although some Western points that had been flying highearlier in the week were measuring their losses in terms ofdollars.

Bombing Iraq seemed as reasonable an explanation as any for whymost cash markets were rising in the neighborhood of a dimeWednesday. Weather was getting a little colder but still relativelymild for this time of year, so it’s not like there’s any big surgein gas demand, a marketer said. The AGA storage report of 49 Bcf inwithdrawals last week, which came too late to affect Wednesday’strading, was approximately in the middle of most expectations andthus neither bearish nor bullish.

EEX Corp. agreed to sell substantially all of its oil and gasproperties in Oklahoma and the Hardeman Basin, North Central Texas,for about $32 million in cash. Lariat Petroleum Inc. is acquiringthe properties in Oklahoma, and Key Production Co. Inc. isacquiring the Hardeman Basin properties. Aggregate daily productionfrom these properties is about 15 MMcfe/d of gas.

The U.S. was getting colder Thursday, but that fact gave nosupport to cash prices, which mostly fell between a nickel and 15cents. A futures drop of less than a penny was too small to matter,sources said, but the second straight report of storage injections,combined with forecasts of warmer weather next week and a drop inJanuary crude oil futures to less than $11/barrel, was too much fortraders to ignore.

The cash market was back on a downhill slide Wednesday as theuprising that had carried some points as much as 80-90 cents higherin the first two days of the week ran out of gas. The retrenchmentwas not unexpected because futures were falling for the second dayin a row and the colder weather that had driven the earlier uptickswas giving way to new forecasts calling for no colder than “normal”temperatures in many areas.