Like dreams, rumors sometimes come true-and more frequentlythese days when the gossip foretells of yet another energy industryconsolidation. Last week’s buzz became this week’s ballyhoo Mondaywhen El Paso Energy and Sonat Inc. said they will merge in a $6billion deal.
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A combination of copious amounts of gas both in the pipe andground, and very little weather demand had the stage set perfectlyfor the futures market to trend lower Monday. But despite all theominous fundamental news and bearish sentiment, few traders wereprepared for the price erosion that occurred in early tradingyesterday. The January contract gapped dramatically lower on theopen and quickly set a $1.97 low in the first half hour of trading.That left the spot month to trade sideways for the rest of the daybefore settling at $1.976. In doing so, the January contractcrushed its previous life-of-contract low of $2.085.
A combination of stronger cash prices met with and conspiredwith constructive technical factors to lift the futures market forthe 4th straight day Tuesday. November managed a 5.9 cent rally tosettle at $2.202, but the big news of the day centered on the outmonths which posted similarly impressive advances, bringing the3-month strip up 6 cents. Estimated volume was a healthy 69, 463 onthe day.
A combination of heat and cold served to keep cash prices on therise again Tuesday. Gains were fairly modest at a nickel or less inthe Gulf Coast, Midcontinent/Midwest and East Coast markets. Theywere primarily supported by continuing air conditioning load in theSouth.