Note

Astronomical gas prices could push another 3.5 Bcf/d of gasdemand out of the market next year, according to a research note byCambridge Energy Research Associates yesterday. While the highgas-use markets, such as fertilizer and methanol producers, alreadyhave curtailed production significantly, CERA said it expects fourmore major demand responses: another wave of fuel switching toresidual fuel oil by industrial boilers, a surge of investment toincrease fuel switching capability, some potential switching todistillate oil and more industrial plant shutdowns.

After opening on a strong note, natural gas futures tumbledlower in the first half-hour of trading Monday as traders tookprofits following Friday’s surprising 17.1-cent rally. However,once December had etched a $4.80 low for the day, the market wasleft to chop lazily sideways for the rest of the session. Theprompt month finished at $4.849, down 8.2 cents for the day.

National Fuel Gas Supply Corp. and Empire State Pipelinereported yesterday that natural gas service is available at a newpipeline interconnection located in Pendelton, NY, in NiagaraCounty. The interconnection includes four miles of 16-inch pipe aswell as regulation and flow control facilities designed totransport up to 150 MMcf/d onto National Fuel’s Line X. The systemwill allow gas supply from Canada at the Chippawa import point toflow to the Buffalo, NY market as well as to National Fuel’sinterconnects with Tennessee Gas Pipeline at East Aurora, NY, andEllisburg, PA; Dominion Transmission at Ellisburg; andTranscontinental Pipeline and Texas Eastern Pipeline at Leidy, PA.Shippers with interest in capacity from Chippawa to the newinterconnect with National Fuel at Pendleton can call SharonAngle-Karry with Empire at 713-418-4105, or shippers with interestin capacity on National Fuel from the new interconnect with Empirecan call George Linder with National Fuel at 716-857-7105.

Natural gas futures finished the week on a strong note Friday astraders reacted to an unconfirmed (and later retracted) news reportthat the American Gas Association (AGA) had overestimated theamount of working gas in underground storage facilities. Aftergapping higher on the open, the December contract shuffled higherthroughout much of the session, closing 17.1 cents higher at$4.931.

Questar canceled Thursday the shut-in of its Clay Basin storagefacility that had been scheduled for Oct. 24-25. The maintenancework will be rescheduled next spring.

Natural gas futures finished on a sour note for bulls Fridayastechnical follow-through selling met with a bearish weather outlookfor this week. The November contract finished at $5.008, down 14.4cents on the day, 17.8 cents lower for the week, and a crushing55.7 cents off its high, reached less than two weeks ago.

After opening on a soft note following last Thursday’s latesell-off, natural gas futures plodded higher for the sixth Fridayin a row, as traders once again shied away from the short side ofthe market ahead of the weekend. The October contract advanced 5.3cents to close at $4.853, but even more impressive was the winterstrip, which advanced an average of 6.1 cents to finish at $4.76.

Sonat was unable to begin repairs Thursday as anticipated (seeDaily GPI, July 27) on a July 5 rupturein its offshore 14-inch Romere Pass Line. However, the work likelywill begin today and last 10-15 calendar days, which means the lineshould be back in service around Aug. 12 at the latest, a spokeswomansaid. An estimated 50-100 MMcf/d at five platform receipt points isbeing shut in by the outage.

At the end of a mostly negative price week, traders decided togo quietly into the weekend Friday. Nearly all points were flat toless than 4 cents up or down.