Factors

One marketer was certain it had to be psychological factors thatsent most markets lower by various amounts Tuesday because, as henoted, fundamentals and the screen indicated an upward pathinstead. Few points besides Malin and the PG&E citygate managedgains as the majority ranged from essentially flat to down about adollar in the Northern Natural Gas market area.

Fueled by forecasts calling for below-normal temperatures andboosted by technical factors, which have suddenly turned verybullish, natural gas futures rumbled higher yesterday as traderstried their hand again at the long side of the market. Aftergapping convincingly higher on the open, the December contractnever looked back as prices drifted 23.2 cents higher to close at$5.081.

With little in the way of fresh fundamental news Thursday,traders were forced to rely on technical factors, which continuedto steer them to the long side of the market. Since plumbing a$4.38 low three days ago, the prompt month has rallied 38 cents toclose at $4.76 yesterday.

For the sixth week in a row, natural gas futures climbed higherFriday as traders once again eschewed the short side of the marketahead of the weekend. After setting the tone with a $4.60 openingtrade, bulls ran the show at Nymex Friday, boosting the promptcontract 8.8 cents to close at $4.628.

The outlook for North American natural gas was “never better”than now, says the top Shell E&P executive. Among the factorsworking in the favor of gas are strong demand from powergeneration, environmental imperatives, integration of the NorthAmerican market, new supply sources and rising prices.

Technical factors can, and often do, send prices hurling in adirection contradictory to what underlying supply and demanddictate. While this confounds dyed-in-the-wool fundamentalists anddelights technicians, it can also backfire. Yesterday was one ofthose days.

Natural gas futures exploded higher yesterday as traders weredealt a royal flush of bullish factors that included much belownormal temperatures on the horizon for much of the country and anew storm brewing in the Caribbean Sea. After opening at $2.98, theNovember contract moved higher, piercing resistance at $3.03 beforerelaxing to finish at $3.007, up 8.7 cents for the session.

Current commercial trends, such as the building of floor spaceand Internet use, will be factors that drive commercial gas demandup 1.2% annually from 3.3 quadrillion Btus in 1997 to 4.0 quads in2015, the Gas Research Institute said in its latest report, the1999 Commercial Sector Summary (GRI-99/0007). It also predicts thatcommercial energy consumption – which accounts for 10% of alldomestic energy demand – is expected to grow 1.1 % annually, from7.6 quads to 9.2 quads by 2015.

Natural gas is one of the factors lurking behind the scenes ofLong Beach’s continuing quest to buy a section of SouthernCalifornia Edison Co.’s power distribution system within its cityborders. The city recently rejected an offer by Edison that wouldhave ended the municipalization campaign. At least part of thereason for the city’s resolve is the likelihood it will be a majorend-point for large new gas loads. But that appears to be a smallpart of a much larger scheme behind the city’s recent activities.