Falling

Nearly all points continued to slide a few more cents Thursday,but afternoon rallies by three key April futures contracts (naturalgas, crude oil and heating oil) had many traders believing thatwould spark a rebound in the gas market today.

Prices kept falling Wednesday but at a slower rate than the daybefore. Even Northeast citygates were putting the brakes on theirdescent, averaging barely more than a dime down.

Except for the still-falling Northeast, Tuesday’s developingmarket plunge came to a complete halt Wednesday and even reverseddirection at several Midcontinent and western points.

Amid a devastating combination of rising temperatures andfalling cash prices the natural gas futures market started the yearwith a crash Tuesday, as commercial and speculative traders alikeliquidated their long positions and added to their shorts. Theprice impact was felt immediately, with the February contractgapping a whopping 10 cents lower en route to a 15.3-cent loss tosettle at $2.176. Despite the sizeable move lower, estimated volumewas a relatively modest 62,491.

In sharp contrast to falling prices in all other areas,Northeast citygates were moving higher Tuesday. By far the mostdazzling performance came from Transco deliveries into New YorkCity that spiked by about a dollar above $4, much as they had onNov. 30. Unlike the end of November, when Transco Zone 6-NYC quotespeaked at $4.75, Tuesday’s top end hit $5.05.

For a lower-demand weekend period preceded by a falling screenand expected to continue the unseasonably warm weather pattern thatdominated nearly all of November, there was surprising firmness inmost of the cash market Friday. Except for further Northeastcitygate declines, essentially flat quotes prevailed elsewhere. Onetrader suggested the moderate gain in futures Thursday may haveprovided a modicum of psychological support for cash traders Fridaymorning.

A big fish gobbled up yet another small fish in the Northeastyesterday as Southern Union Co. (SU), the spurned suitor ofSouthwest Gas, announced it has agreed to purchase ProvidenceEnergy (ProvEnergy) for a total transaction value of $400 million.The deal, which SU expects to close in nine to 12 months,represents SU’s third Northeast utility purchase this year. If allthese deals are completed, Southern Union will serve 1.5 millioncustomers in Rhode Island, Massachusetts, Pennsylvania, Texas,Missouri and Florida.

For the third straight day, unseasonable weather teamed with afalling futures screen to land a knockout blow on price bulls’chins, as only a few cash points escaped losses of more than adime. A huge swath of high 60- to mid 70-degree temperatures acrossthe Rockies, Gulf Coast, Midcontinent and Northeast eradicated anywinter demand yesterday and caused traders to long for the golfcourse instead of the office. Adding fuel to the fire, forecastsare calling for similar weather for the rest of the week.

Wild speculation last week that Chevron was courting PhillipsPetroleum proved to be false as Phillips management told analyststhe company is not interested in merging with anybody. But theBartlesville, OK-based energy company is planning on selling GPMGas Corp., its natural-gas gathering, processing and marketingsubsidiary, and may form joint ventures with other companies onchemicals and refining and marketing so that it can concentratemainly on exploration and production.