Prices

Cash prices kept rising Wednesday but at a considerably slowerrate than on Monday and Tuesday. Most of the new increases werearound a nickel or less, and the Northern California points ofMalin and the PG&E citygate actually fell slightly afterPG&E elected not to extend a low-linepack OFO. Sourcesindicated some retreat is likely today, saying the cash market hadmilked just about all the upside possible out of recent forecastsfor colder weather. In addition, the screen’s decline of nearly adime Wednesday should be a negative influence, they said.

Transcontinental Gas Pipeline says it’s willing to price itsproposed SouthCoast expansion in Georgia and Alabama at anincremental rate, which should eliminate much of the opposition tothe project.

Still reeling from a “devastating” weather picture the naturalgas futures market gapped lower on the open yesterday and continuedlower as traders added to short positions. By slipping 7.3 cents to$2.451 the December contract came perilously close to breakingthrough the lowest level of any spot contract since summer lowswere put in. The January contract, meanwhile, fared even worse,dropping 8.5 cents to finish at $2.596.

Vastar Resources would appear to be taking a wait-and-see viewof next year’s gas prices. CEO Chuck Davidson told Houston energyreporters Tuesday that “not much” of the company’s gas productionis hedged next year. Indeed, Vastar generally doesn’t hedge morethan a year out and hedges less than 50% of its production.Davidson said the company also is using more collars rather thanhedges linked to a specific price.

Even as cash prices plummeted 25 cents or more for weekenddeliveries the futures screen managed to push higher Friday astraders looked past the unseasonably warm weather outside theirwindows and focused instead on short and medium range forecasts.After a strong opening at $2.56 the December contract caught a waveof technical buying from both trade and local shorts, allowing itto peak at $2.71 before settling up 12.7 cents at $2.649.

Vastar Resources would appear to be taking a wait-and-see viewof next year’s gas prices. CEO Chuck Davidson told Houston energyreporters Tuesday that “not much” of the company’s gas productionis hedged next year. Indeed, Vastar generally doesn’t hedge morethan a year out and hedges less than 50% of its production.Davidson said the company also is using more collars rather thanhedges linked to a specific price.

It had appeared Thursday the tumble back down for cash pricesmight get just as steep as the climb upward had been earlier lastweek. But in Friday’s trading for the weekend, the downward slopegot considerably gentler as few points other than the Southwestbasins fell more than a nickel, and many declines were milder thanthat. In fact, Northern Natural’s demarc and Ventura points sawsmall upticks due to freezing temperatures in parts of the pipe’smarket area, and Chicago citygates also rose, probably fromforecasts of the Upper Plains chill moving eastward.

Colder weather in northern market areas didn’t do much to raisecash prices, but it kept demand high enough to provide some pricesupport. Most eastern points were flat to slightly higher. In theWest, Rockies pipes emulated markets to the East with generallyflat performances, but California points fell by about a nickel ormore after PG&E announced it was lifting its two-daylow-linepack OFO.

After much talk earlier in the week about how weak the cashmarket looks, it must have surprised some traders Wednesday to seeall but a few scattered points range from flat to as much as anickel higher. Between a neutral screen and no change infundamental factors, sources had trouble explaining why Tuesday’sprice skid came to such a quick halt only a day later. A marketersaid he wanted to suggest the “bears” had gone into hibernation,but it was too long before winter begins for that.