Fears

Adding to Monday’s advances, natural gas futures were higher on Tuesday as traders bid prices higher on technical bullishness and concerns over the possible formation of a tropical depression near south Florida. The September contract finished at $5.217, up 8.8 cents for the session, 18 cents for the week, and a whopping 63.7 cents off its low notched late last month.

What a difference a month has made in terms of easing the fears about a natural gas supply shortage and escalating prices, according to the Energy Information Administration’s (EIA) short-term energy outlook for August.

What a difference a month has made in terms of easing the fears about a natural gas supply shortage and escalating prices, according to the Energy Information Administration’s (EIA) short-term energy outlook for August.

Is the second shoe of another bankruptcy filing in the energy merchant sector about to drop? No doubt it’s a question on the minds of a lot of energy industry executives after Xcel Energy last Monday said that there is a “substantial likelihood” that its NRG Energy unit will be the subject of a bankruptcy proceeding and Reliant Resources warned that it may need to pursue Chapter 11 if it can’t cobble together financing deals on acceptable terms.

After posting a negative open, natural gas futures rebounded strongly Tuesday to notch its fourth-straight higher close, as both speculative and commercial traders loaded up on long positions in anticipation of the formation of Tropical Storm Isidore in the Caribbean. As it turns out, that buying was enough to press prices to a new four-month high at $3.695. Slipping only slightly to close at $3.679, the October contract finished 24.9 cents above its earlier low and 17.2 cents above Monday’s settle. Estimated at 113,063, volume in the gas pit was extremely heavy.

Energy marketers and merchant power generators have watched their stocks drop precipitously as investors continue to run from companies even remotely associated with, or similar to, bankrupt Enron Corp. The walking wounded include Mirant (down about 36% by midday Friday from the prior Friday’s close), Calpine (down 37% for the week), Williams (-16%) and Dynegy (-17%), NRG (-14%), Aquila (-14%), El Paso (down 6%), and Reliant (-5%).

Amid deepening fears that the U.S. economy is headed for a recession, and exacerbated by light trading volume following a bomb threat at Nymex, natural gas futures tumbled to new 19-month lows Tuesday, as institutional traders increased their short exposure. Almost uniform selling was seen across the entire strip of contracts, pressuring the winter strip down 15 cents to $2.99 and the 12-month strip down 13 cents to $2.97. The October contract closed at $2.225, down 14.4 cents for the session.

Houston-based Parker Drilling Co. reported on Wednesday that despite recent fears that production is on its way toward the outpacing of demand, its rig fleet is staying busy. The company announced it has reached a contract with Nexen Petroleum for Rig 15-J, which is a shallow water design mat-slot jackup capable of working in water depths ranging from nine to 85 feet. The rig is on location in the Eugene Island area where it will drill a 14,000 foot horizontal well in 9 feet of water. The contract calls for one well, which will take approximately 60 days to drill, plus options for two additional wells. “In spite of some recent softness in the industry, utilization of our Gulf of Mexico fleet remains strong,” said Toby Begnaud, Parker’s general manager of global sales and contracts. “A program such as this, with specific water depth limitation, is an example of the niche market Parker Drilling has targeted and why we feel our overall utilization does not track with current market trends.” Parker Drilling specializes in offshore drilling and workover services in the Gulf of Mexico and international land and offshore drilling. The company has 79 marketed rigs and employs more than 3,500 people worldwide.

During a year that saw fears of natural gas shortages sendprices through the roof, spurring E&P companies into frenzieddrilling, energy company shares reached a median total return of48% in 2000, according to a new report by John S. Herold, Inc., aConnecticut-based independent energy research consulting firm.