Increases

Virtually all points fell Thursday as they succumbed to a triple whammy of bearish threats: further increases in storage inventories, futures weakness and mild weather for mid-winter that refuses to go away and allow normal cold conditions to take hold.

Most of the market continued to rise Wednesday, but nearly all of the increases were smaller than Tuesday. Predictions of warmer temperatures approaching, particularly in the Midwest and South and to a lesser extent in the Rockies, create a moderately bearish price outlook through the end of the week.

Although softening continued at New England locations, most of the market found enough impending increases in heating load to spur higher prices Tuesday. The overall cash bullishness was able to overcome a prior-day drop of 8.7 cents by December futures and expectations that a net build in storage had extended into at least the first week of November.

November natural gas rose on heavy volume Thursday in spite of an inventory report that indicated increases not only greater than historical norms but also higher than what analysts expected.

Relatively cool weather in most of North America has yet to translate into substantive heating load increases; a tropical storm threat remains nonexistent and likely to stay that way through the final two months of the 2011 Atlantic season; and a screen drop of 8.1 cents Friday kept downward pressure on the cash market. The return of industrial load from its weekend decline provided weak market support.

Emergency responders were wrapping up their work Thursday afternoon at the site of a reported explosion at a drilling rig in the Eagle Ford Shale in Falls City in Karnes County, TX. According to press reports, two people had been hospitalized. The explosion reportedly occurred just before noon. The Karnes County sheriff was not available for comment, but a deputy said at 2:30 CDT that crews were preparing to leave the scene. The rig was reported to be targeting oil; the name of its owner/operator was not available at press time. Texas Department of Public Safety spokesman Jason Reyes told the San Antonio Express-News that a truck driver who was transferring oil was injured when a truck was set on fire and ignited the explosion. The driver received second- and third-degree burns, he said. In a separate incident Monday night an explosion and fire occurred at a Continental Resources natural gas well in Oklahoma; there were no injuries (see Daily GPI, Sept. 21).

A committee of West Virginia lawmakers has recommended steep increases to permit fees and bonding requirements for Marcellus Shale drilling, expanding the public notice and comment period over drilling activities and changing the way it hires natural gas well inspectors.

Idaho regulators have begun investigating proposed natural gas and electric generation rate increases for Spokane, WA-based Avista Utilities, which serves 122,500 retail electric customers and 74,200 gas customers in the northern part of the state. Avista is seeking a 3.7%, or $9 million, annual electric rate hike and a 2.7%, or $1.9 million, increase annually on the gas side. Overall, Avista is asking for an 8.49% rate of return and a 10.9% return on equity. The utility asked for an Aug. 5 effective date and the Idaho Public Utilities Commission (PUC)suspended the gas and electric increase requests for six month to allow time for the PUC’s standard review. In the meantime, Avista’s Idaho customers will see rate hikes Oct. 1 — 3.9% on the power side and 0.72% for gas — based on the second-year payment of a settlement for Avista’s general rate case last year. The earlier case increased electric rates 9.25% and gas 1.9% over a two-year period for Avista.

August natural gas futures tumbled Thursday following the release of inventory data showing greater-than-expected increases. For the week ended July 1, the Energy Information Administration reported a build of 95 Bcf, about 10 to 15 Bcf greater than what traders were expecting. Prices quickly obliged following the 10:30 a.m. EDT report and by the close August futures had declined 8.4 cents to $4.133 and September had jettisoned 8.4 cents as well to $4.138. August crude oil soared $2.02 to $98.67/bbl.