Expected

As many traders had expected, prices were unable to sustain thestrong upward momentum with which they began the week. Even asblizzard conditions got worse Tuesday in several major marketareas, quotes for today’s gas flow were flat to as much as a nickellower. Apparently utilities and other end-users started leaningmuch more heavily on their storage accounts after Monday’s cashrun-up left many points trading well above first-of-month indexes,especially in Eastern markets, one source said.

The Federal Energy Regulatory Commission is expected to go onthe record this Wednesday with thoughts, but not votes, on thecompeting Independence and Millennium pipeline projects which arevying to be the last link in the new path for western Canadian gasdelivered to the U.S. Northeast.

Although generally moving a little bit below index levels, theinitial February aftermarket proved stronger Monday than manytraders were expecting. Several points managed to stay flat toindex. Considering how little weather demand there was in majormarket areas and the difficulty some suppliers reported inscrounging up buyers, it was surprising how little price erosionthere was, a Texas marketer said.

Los Angeles-based ARCO said after-tax special charges in thefourth quarter are expected to total $890 million. Net chargeincludes asset write-downs, restructuring costs, and a tax refund.Asset write-downs are a result of investment impairments totaling$790 million after tax and mainly related to expectations of lowercrude prices. Properties involved include some assets acquired aspart of the Union Texas Petroleum (UTP) purchase and other assetsin the UK North Sea, Middle East and North Africa. Essentially allof the oil and gas properties impacted are overseas.

The Commodity Futures Trading Commission (CFTC) is expected toapprove Tuesday a proposed Chicago Board of Trade (CBOT) PJMwestern hub electricity futures contract, based on physicaldelivery into the PJM western hub electricity cash market ofPennsylvania, New Jersey and Maryland. The contract is to be tradedalong with the CBOT’s TVA and ComEd contracts, creating a powercomplex to provide risk management to the southeastern, midwesternand northeastern United States. The CBOT announced the proposed PJMcontract in November.

Natural Gas futures rallied again yesterday as traders reactedto colder-than-expected temperatures throughout much of the Midwestand Southeast. And similar to advances made last week, Monday’sprice action was fast and furious with the February contractleading the way and gapping 6 cents above Thursday’s high. However,once the $2.085 high for the day was reached about 10:30 EST, theprompt month was left to move sideways within a narrow trading bandfor the rest of the session, notching a 12.6-cent increase tofinish at $2.071.

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 week’s trading wound to a close Friday with generally lesssoftness than had been expected. In relatively quiet activity, mostpoints were down a few cents with only occasional lapses of morethan a dime. A Midcontinent source who said Thursday he wouldn’t besurprised to see mid $1.30s pricing for the weekend, found insteadmost regional numbers averaging in the $1.50s Friday.

An announcement of the outcome of the merger talks between ExxonCorp. and Mobil Corp. is widely expected to occur today, with mostexpert industry-watchers anticipating the two energy behemoths willproduce a definitive deal, while a few say it’s still too close tocall.