Injection

Although the record-setting storage injection numbers and drop in gas prices last week were encouraging signs, Charles Schwab energy analyst Christine Tezak says she wouldn’t rule out Washington possibly interfering in the gas markets over the next year by either capping prices or ordering supply rationing if market conditions should take a turn for the worse.

As traders had expected, the above-expectations storage injection report and a continuing dearth of heating load in nearly all areas outside the mountain West resulted in softening prices at all point Friday. Of course, the usual dip in demand over a weekend also played some part.

Southern Natural is conducting a shut-in test at its Muldon storage field, which is reducing storage injection capacity by 64%. Based on current supply and projected demand, Southern will substantially exceed its maximum storage capacity on Thursday. Southern said unless there is a significant reduction in supply, a Type 6 OFO could be implemented.

ANR Pipeline said it will limit interruptible (rate schedule DDS and MBS) storage account activity for the remainder of the injection period (through October 31). Due to current and projected storage inventory, it is notifying all DDS and MBS customers that their account balances, as of Sept. 16 will be limited to zero net injections from Sept. 17 through Oct. 31. ANR said it will continue to allow injections into either DDS or MBS during this period provided that an equal or greater amount of gas is withdrawn prior to Nov. 1. Daily operating conditions and firm service confirmations will determine the daily level of interruptible storage activity allowed.

Continuing to experience high linepack due to overproduction, low systemwide demand and limited storage injection capacity, Tennessee said it expects to keep the OFO Balancing Alert that took effect Saturday (see Daily GPI, Nov. 19) in place until at least next Monday.

With the AGA report of yet another weekly injection of 7 Bcf for the second week of November and mild weather continuing across most of the country, natural gas spot prices tumbled lower again Wednesday, causing some unusual price spreads between regions and some significant storage plays for those with a little space still available. The Rocky Mountain region once again was the exception, with sharp increases attributed to a short-term storage play.

National Fuel is holding an open season for up to 1 Bcf winter firm storage and transportation services (Nov. 1-Feb. 28). The service includes maximum injection of 10,000-30,000 Dth/d and a maximum withdrawal of 33,333 Dth/d. Receipt and delivery points include Columbia (Independence), Dominion (Ellisburg), Tennessee (Rose Lake), TransCanada (Niagara), Transco (Leidy) and Transco (Wharton). Bid sheets are available at National Fuel’s web site or by calling (716) 857-7740. For details call Jim Zernentsch (716) 857-7509.

Without another large storage injection to pull the rug out from under the market (AGA delayed its report until Thursday), technical factors and a short-term cold front that’s expected to move across the Midwest and Northeast later in the week enabled November gas futures on the New York Mercantile Exchange to continue climbing Wednesday. The near-month contract reached a high of $2.360 and settled at $2.320, which was a 5.2-cent daily increase. The daily low was $2.270.

Prices fell Thursday in the wake of a large storage injection report and a continuing dearth of air conditioning load. Volumes and trading activity remained minimal in the absence of futures guidance, and sources reported that the feelings of grief and numbness from the attacks against New York City’s World Trade Center and the Pentagon were slow in dissipating.