Drop

Adding to Monday’s 18-cent price slide the futures marketdribbled lower yesterday as traders factored warming temperaturesinto prices and hunted for sell-stops amid two distinct sellingsurges.

Fresh off a two-day, 24-cent price drop, natural gas futurestraded unchanged for most of the session Tuesday with light buyingand selling by trade accounts matching up nearly perfectly. Bymid-afternoon, however, it looked as if bears would make it atrifecta, as they successfully etched new lows for the Januarycontract down to $2.21. But after remaining on the sidelines formost of the day, speculators were seen as aggressive buyers intothe final bell. That enabled the January contract to finish on apositive note, up 4.7-cents to $2.271.

After a two-day, 20-cent price drop to begin the week, thefutures market held its ground Wednesday as traders waited on thesidelines in anticipation of fresh supply and demand news releasedyesterday evening. By virtue of its 0.5-cent advance and higherhigh and lower low, yesterday’s session completed a bullish outsideup day on the daily charts. But despite the positive movement, thespot contract was unable to fill in a key chart gap up to $2.52.

Much like two Fridays earlier, the usual drop in gas demand thataccompanies business slowdowns over a weekend failed to have anegative effect on prices last Friday. Although it later fell morethan a nickel, an initially higher screen helped cash achieve gainsranging up to about a dime at nearly all points. Only San JuanBasin, the Southern California border and PG&E citygateregistered losses, and those were small at 3 cents or less.

After having been told to drop dead by Texaco in a publicstatement released in June, Chevron now apparently is courtingPhillips Petroleum, a smaller prize but still a significantconsolation if accomplished. Reports surfaced over the weekend inthe British Sunday Times in London that Chevron was willing to paya 20% premium and that triggered a 5% spike in Phillips shareprices yesterday. The companies would neither confirm nor deny therumors, but Phillips shares closed up $2.81 yesterday at $56.56,well above its 52-week high. A 20% premium would put the purchaseprice near $17.2 billion. Chevron stock, meanwhile, took a slight88-cent dip yesterday to $92.12/share.

Following a five-day, 30-cent price drop, the natural gasfutures market dug in its claws Friday as scale-down industrialbuyers found good value in winter gas prices. Gaining 6.2 cents tofinish at $2.608 the October contract was only the tip of theiceberg. Led by the December contract, which was up 7.7 cents to$2.974, the winter strip (Nov.-Mar.) posted an impressive 5.6-centgain.

Cash prices rode a soaring October futures contract,stilll-strong power generation demand and the remote threat ofTropical Storm Floyd to higher levels again Thursday. Gains wereslowing down from Wednesday’s pace but ranged from 2-3 cents at afew points to about a dime at many of them.

The overall cash market drifted lower Friday, with quotesranging from essentially flat into Northwest for both domestic andCanadian gas to nearly 15 cents lower at the PG&E citygate. Thegeneral softness primarily was a function of the usual weekenddropoff in gas load, sources said.

Raymond James & Associates’ gas analysts warned investors last week the latest production statistics indicate gas production is down 4-6% compared to last year and a tally of producers’ statistics for the second quarter by NGI found that conclusion to be accurate (See Table).