Overall

The Canadian Gas Association’s 1998 demand forecast showsoverall domestic gas consumption increasing nearly 30% over thenext 12 years to 100.7 billion cubic meters in 2010. The industrialsector is expected to enjoy the strongest growth (up 38% over theforecast period), largely driven by increases in power generation.In 2010, the industrial sector will represent 63% of total end-usegas demand in Canada, with consumption pegged at 63 billion cubicmeters. This compares to 45.7 billion cubic meters in 1998.

Michigan citygates and intra-Alberta numbers stuck out like sorethumbs Wednesday in an incremental cash market where all otherpoints were dropping between a nickel and 20 cents. A furtherdecline in the November futures contract combined with continuingmild weather and the perception that Hurricane Mitch is only a veryremote threat to offshore production to cause the cash softness,sources said.

Cash market predictions proved accurate again as pricescontinued to slide going into the weekend Friday. It didn’t take arocket scientist to make that call, sources said, as forecasts ofgorgeous weather virtually throughout the nation (and north of theborder too) should lower gas load greatly by encouraging a lot ofoutdoor activity.

Overall the cash market Thursday decided one bearish storagereport in the hand was worth more than two tropical storms in thebush. But although nearly all points checked in as flat to downabout a nickel, sources said the softness probably would have beenquite a bit greater if it hadn’t been for September’s thirdstraight weekly storm threat to Gulf of Mexico production,especially in light of the screen’s nickel-plus drop.

Most cash points tended to ignore Thursday’s rebound on thefutures screen and instead focused on weak fundamentals. Many GulfCoast and Midcontinent pipes were leveling off from Wednesday’sprecipitous plunges, although several in the Gulf fell a few morecents. The losers included points in South and East Texas despite aferocious heat wave straining the state’s electric utilities.

The overall cash market was flat to slightly higher Monday, withlarger increases tending to occur in the Southwest basins,Rockies/Pacific Northwest and California border. But by far thehighest-flying price point was intra-Alberta, where a NOVA ruptureSaturday (see Transportation Notes) was keeping up to 1 Bcf/d offthe market. Gas that had been trading in the low C$1.50s Saturdaymorning prior to the rupture was up to the C$2.10 area Monday, aCalgary source said.

Cash prices emerged from the weekend with widespread gainsMonday. Most were of the small-to-medium variety at 2-6 cents, buta scorching West tended to see a lot of double-digit increases. SanJuan Basin and the Southern California moved in near-lockstep,rising about a quarter each. However, a basis relationship gap ofnearly 50 cents between the two points remaineduncharacteristically wide compared to traditional levels,reflecting the inroads made by Canadian and Rockies supplies intothe California market in recent years.

The overall cash market was far from a model of consistencyWednesday. While prices rose by up to a nickel at Gulf Coastpoints, Northeast citygates were no more than flat to up a penny.In contrast, while Michigan and Chicago-area citygates saw gains of2-3 cents, field prices in the Midcontinent were mostly flat around$2.10. However, a Midcontinent producer found it “a littlesurprising” that trading ended on a modestly strong note with latedeals tending to be near the top of small ranges.

Despite Tuesday’s overall price losses, the rising trend astrading progressed carried over into Wednesday and resulted inmoderate to strong rebounds. Increases mostly were in the range of5-10 cents and tended to cancel out the Tuesday declines.