Observers

It will take years to develop, but industry observers are watching what may be the most significant discovery in the Gulf of Mexico (GOM) deepwater to date. The discovery was announced last week by Chevron Corp., Devon Energy Corp. and Statoil ASA after the trio completed the deepest extended drill stem test in history, with a successful production test on the Jack No. 2 well at Walker Ridge Block 758.

With strength in Sunday’s overnight Access trade session prompted by forecasts for midweek cold, natural gas futures observers were expecting more of the same on Monday. However, after the December contract notched a high of $11.90 in morning trade, it plummeted just before 11 a.m. EST to carve out an $11.37 low before settling at $11.607, down 10.5 cents on the day.

The gas market this year is shaping up to be a lot like the market last year and observers should expect a pretty big dip in prices this summer, according to Steve Thumb of consulting firm Energy Ventures Analysis Inc. (EVA) in Arlington, VA. Thumb said rising domestic supply will be the biggest difference in the market this year.

The gas market this year is shaping up to be a lot like the market last year and observers should expect a pretty big dip in prices this summer, according to Steve Thumb of consulting firm Energy Ventures Analysis Inc. (EVA) in Arlington, VA. Thumb said rising domestic supply will be the biggest difference in the market this year.

In a move that has some observers suggesting the market may have shed its bear coat, natural gas futures prices climbed near key resistance Thursday morning on the news that a whopping 224 Bcf was pulled from storage last week. However, after coming fast out of the gate, the March contract disappointed bulls late in the session by failing to test key pivot points at $5.56 and $5.60. It closed at $5.451, up 19.1 cents on the day.

On the eve of what some observers predict could be one of the largest reported storage withdrawals in history, the natural gas futures market appeared content to trade flat for the session Wednesday.

While many gas market observers believe the recent price spikes have been significantly overdone, this does not rule out the possibility that there has been a legitimate tightening in the market, according to energy consultant Stephen Smith of Natchez, MS-based Stephen Smith Energy Associates. The federal government’s own long-term gas forecast released last week supports that conclusion (see related story).

While few gas market observers would disagree that the recent gas price spikes have been significantly overdone, this does not rule out the possibility that there has been a legitimate tightening in the market, according to energy consultant Stephen Smith of Natchez, MS-based Stephen Smith Energy Associates.

Some observers were expecting a mountainous move in natural gas futures Tuesday as Alan Greenspan told Congress that the nation has a long-term gas supply problem. What they got instead was a minuscule 1.6-cent hiccup from a market that had digested the news long ago. July futures ended the day at $6.330 with a high of $6.355 and a low of $6.23. August also gained 1.6 cents to $6.42, and September added 2 cents to $6.424.