Happened

Given what happened to the industry last year with Hurricanes Rita and Katrina, it’s pretty easy to make a bull’s case for the natural gas market. In fact many industry prognosticators expect that once the current gas storage surplus is worked off, an underlying tight supply-demand balance will return, driving prices back into the stratosphere. But Stephen Thumb at consulting firm Energy Ventures Analysis in Arlington, VA, believes many experts are underestimating the impact that LNG will have on the U.S. market.

Given what happened to the industry last year with Hurricanes Rita and Katrina, it’s pretty easy to make a bull’s case for the natural gas market. In fact many industry prognosticators expect that once the current gas storage surplus is worked off, an underlying tight supply-demand balance will return, driving prices back into the stratosphere. But Stephen Thumb at consulting firm Energy Ventures Analysis in Arlington, VA, believes many experts are underestimating the impact that LNG will have on the U.S. market.

The unexpected happened again on Tuesday when natural gas cash and futures prices defied the slightly cooler weather trend, the overbought conditions on Nymex, the absence of a threatening hurricane and the lofty height of price levels — and proceeded to continue climbing.

Wednesday’s cash market was basically a repeat of what happened on Tuesday with Northeast prices making further gains of more than 60 cents to highs well above $10 at most locations while the rest of the market was flat or slipped a little with the weakness in the futures market and forecasts of warmer temperatures next week.

The current level of volatility in the natural gas futures has some traders wondering if all that has happened is that one form of weather-induced volatility has been traded for another form or price hyperactivity.

Explaining that a lot has happened since the company’s last rig count forecast released in December, Raymond James & Associates analyst J. Marshall Adkins said the company is adjusting its rig count forecast downward by 60 rigs. Adkins added that given the sharp rebound in commodity prices, he believes the bottom in U.S. rig activity is “very near.”

The “new” Enron Corp. will be a smaller company, based on hard assets with predictable revenue and cash flow, its new interim CEO said in his first press conference Wednesday night in Houston. He also was emphatic in talking about what caused the Fortune 100 company to go under so quickly. “I frankly don’t care,” said Stephen Cooper.

Capping a week that bull traders would like to pretend never happened, natural gas futures continued to fall Friday as sellers continued to methodically and justifiably extend their short holdings and pressure prices lower. After gapping lower following the holiday weekend, the February contract never looked back as it etched a new life-of-contract low in each session last week and sunk to a new four-month prompt contract low at $1.99. February closed at $2.037 Friday, down only 1.1 cents for the day but off a hefty 19.9 cents for the week.

A funny thing happened on the way to the FERC last week: prospective Independence and SupplyLink shipper Duke Energy defected, but Dynegy quickly filled in the gap as the proposed new long-haul projects re-formed their ranks and marched toward this week’s open meeting.