Climbing

‘Playing it safe’ seemed to be the motto of natural gas futures traders again on Tuesday. After climbing as high as $11.860 in Tuesday morning trade, December natural gas began its search lower in the afternoon, putting in an $11.500 low before settling at $11.563, down 4.4 cents for the day.

With petroleum futures climbing on expected July 4th holiday demand and the possibility of a significant storm hitting the Gulf of Mexico early this week, natural gas futures traders on Friday weren’t taking any chances. Halting the recent slide in prices, August natural gas futures rebounded higher in shortened trading Friday, crossing back above the $7.00 level to settle at $7.171, up 19 cents on the day, but 24.1 cents lower than August’s previous Friday settle.

Dynegy Inc. last week began climbing out of its deep debt-filled hole, launching a major junk bond refinancing project as well as a stock restructuring deal to pay off a credit line with ChevronTexaco Inc., its largest shareholder. If the transactions are completed as envisioned, Dynegy’s debt maturities would be “significantly” reduced over the next few years, including a portion of its recently restructured $1.66 billion credit facility and the secured financing of its Midwest generation assets.

After climbing to a new two-week high Friday, natural gas futures spiraled lower Monday morning as traders learned that forecasts calling for extreme cold last week have been tempered. Also at work, market-watchers agree, is residual selling following a neutral to bearish storage report released Friday.

As many traders had anticipated, Wednesday afternoon’s dime-plus uptick in natural gas futures translated into strong cash gains at most points Thursday. However, prices again deteriorated greatly in the capacity-constrained San Juan Basin, which was joined in its softness by Rockies pipes as supplies backed up there, largely unable to get to California and east-of-California markets via El Paso.

Some traders may have been surprised to see prices leveling off or climbing a few cents higher at most non-western points Thursday. But fundamental weather support was rising, as colder weather either had entered or was due in the Northeast, Gulf Coast production area and Pacific Northwest. Also, the screen was marginally higher during the morning, before turning negative later.

Investors looking for a rise in exploration and production stocks will be “climbing a wall of worry” at least in the near term, according to FAC/Equities analyst Robert Christensen Jr. There are so many negatives, including packed gas storage inventories, no winter weather to speak of, and low oil and gas prices. But the plummeting rig count and declining production point to a turnaround by the middle of 2002, he said.

Investors looking for a rise in exploration and production stocks will be “climbing a wall of worry” at least in the near term, according to FAC/Equities analyst Robert Christensen Jr. There are so many negatives, including packed gas storage inventories, no winter weather to speak of, and low oil and gas prices. But the plummeting rig count and declining production point to a turnaround by the middle of 2002, he said.

Natural gas storage levels are at an all-time high and the year-on-year storage deficit, which currently stands at 484 Bcf, is likely to balloon to more than 600 Bcf by mid-December, causing further downward pressure on spot prices, said Ronald Barone, a gas analyst with UBS Warburg.