Factors

After holding support following a knee-jerk downward reaction to the latest industry supply data, natural gas futures vaulted higher in two distinct buying surges. The first rally consisted of a move back above $3.30 that came on the heels of the 10:30 a.m EDT storage report. After a brief siesta, bulls were running Thursday afternoon, lifting prices convincingly higher into the close. October finished at $3.342, up 14.9 cents for the day and 24.2 cents above its early-session low.

With few fresh fundamental factors in which to sink their teeth, natural gas traders battled back and forth Friday, producing a wide 15-cent trading range. But despite the spirited session, the August contract finished with an unremarkable 0.1-cent decline and $2.933 settle, leaving plenty of questions still to be answered when trading resumes Monday. At 93,495, estimated volume was moderate to heavy for a Friday in July.

With few fresh fundamental factors in which to sink their teeth, natural gas traders battled back and forth Friday, producing a wide 15-cent trading range. But despite the spirited session, the August contract finished with an unremarkable 0.1-cent decline and $2.933 settle, leaving plenty of questions still to be answered when trading resumes Monday. At 93,495, estimated volume was moderate to heavy for a Friday in July.

Merchant energy shares were hammered last week by multiple factors, the most significant being a FERC inquiry into the California electricity transactions of 150 energy merchants and power generators prompted by several Enron memos disclosed by FERC on Monday (see related story). Dynegy was struck particularly hard following an announcement on Tuesday that the Securities and Exchange Commission launched a formal investigation into its Alpha Project — a complex gas supply transaction. That was followed by news that some large “wash-out” power deals with CMS Energy might also be included in the probe.

Outside factors, led by the scrutiny of the credit ratings agencies, could become the biggest deterrent to building new infrastructure, according to energy executives speaking at the GasMart/Power 2002 conference in Reno last Wednesday. Bill Hobbs, CEO of Williams Energy Marketing & Trading, said that while the “Enron hype is gone,” the $15 billion worth of capital cuts made by companies in the past few months “will have a significant impact” in the next five years.

Just as “location, location and location” are the three key market factors to a real estate agent, it was all “weather, weather and weather” that was meaningful to gas traders Thursday. Strong price increases continued, although the uphill slope wasn’t quite as steep as the day before. Nearly all of Thursday’s increases ranged from about a dime to 20 cents with little geographical variation.

Chevron Corp. said last week it will work with Irving Oil Ltd. to study the costs and other factors involved in building a C$500 million (US$320 million) liquefied natural gas (LNG) plant in Saint John, NB. Irving Oil, a family-owned company with energy interests in eastern Canada, announced two months ago that it was considering construction of an LNG plant at its ice-free Canaport deepwater facility, where it has operated an oil terminal since 1970 (see NGI, July 30).

Chevron Corp. said Monday it will work with Irving Oil Ltd. to study the costs and other factors involved in building a C$500 million (US$320 million) liquefied natural gas (LNG) plant in Saint John, NB. Irving Oil, a family-owned company with energy interests in eastern Canada, announced two months ago that it was considering construction of an LNG plant at its ice-free Canaport deepwater facility, where it has operated an oil terminal since 1970 (see Daily GPI, July 26).

Pressured by a triumvirate of bearish factors — weather,technicals and cash prices — natural gas futures plodded lower inan abbreviated, pre-holiday session Friday as weak longs continuedto shed their positions. However, instead of liquidating theirlongs entirely, traders elected to roll their prompt holdings intoout months. At the closing bell, the February contract was 23.6cents lower at $8.472 while the summer strip (Apr.-Oct.) was 6.7cents higher on the day at $6.085.