Rising

Swing trading for the last day of November saw prices rising bydouble-digit amounts at nearly every point Monday except in theRockies. The fact that post-holiday temperatures had grownconsiderably colder in the East were a partial factor in theincreases; however, sources said it were the avoidance of payingeven higher November cash-out prices to the pipelines that wasprimarily behind the incremental push higher.

Improving crude oil market conditions usually are accompanied byincreasing political scrutiny into rising prices. A good example ofthat is occurring in California where Attorney General Bill Lockyerhas vowed to probe deeply into the mergers of major oil and gasproducers following a report that shows consolidation is one of thereasons California has experienced some of the highest gasolineprice spikes in the nation.

Due to rising market-area demand following the weekend, Florida GasTransmission found it necessary to reinstate Monday an Overage AlertDay notice that it had lifted Friday after a three-day run (see DailyGPI, Oct. 4). The low-linepack OFOcarries 8% tolerance for negative daily imbalances and applies to thesystem east of Station 12 (Santa Rosa County, FL). FGT also continuedto extend maintenance at Sabine Pass Plant/Johnson’s Bayou insouthwestern Louisiana, which was originally scheduled to end May 17,1999, but said late last week it was increasing allowable volumesthrough the facility by another 10 MMcf/d, raising its total capacityto 110 MMcf/d.

Arguments likely raged all day Friday over whether the gasmarket was overreacting to Tropical Storm Bret or not. But as evena member of the “overhyped” camp reluctantly conceded, there was nodenying that cash prices ignored mild northern market-area weatherand the usual drop in weekend load to achieve gains of up to adime. The smallest showings of flat to only about a nickel highercame at western points, which are more insulated from potentiallosses of Gulf of Mexico production.

Cash prices built further Tuesday on their early-week gains invirtually every market except Northern California. Factors behindthe firmness remained much the same as on Monday: a moderate screenincrease, a “stash it while you can” storage mentality and agradual warming trend in northern market areas. Price movementranged from flat on several Rockies pipes to about a nickel higherat many Gulf Coast and Midcontinent points.

The cash market resumed its climb Thursday, buoyed by a risingHenry Hub futures contract, a tightening supply situation,spreading cold weather and air conditioning load from Texas throughthe Southeast. A “lean” storage report Wednesday afternoon added tobullish sentiment, a marketer said.

All-around price increases Wednesday received support fromcontrasting weather conditions and rising power generation load(plus a tiny assist from a barely higher screen). Most upticks werein the neighborhood of 4-8 cents, although smaller ones were aslittle as two cents at the PG&E citygate.

Bombing Iraq seemed as reasonable an explanation as any for whymost cash markets were rising in the neighborhood of a dimeWednesday. Weather was getting a little colder but still relativelymild for this time of year, so it’s not like there’s any big surgein gas demand, a marketer said. The AGA storage report of 49 Bcf inwithdrawals last week, which came too late to affect Wednesday’strading, was approximately in the middle of most expectations andthus neither bearish nor bullish.

With demand rising in southern California and its pipes too fullto do anything about it, Transwestern Pipeline Co. is holding anopen season through Dec. 18 to solicit shipper interest in apossible mainline expansion. The pipeline is exploring theconstruction of a compressor station near Gallup, NM, that willincrease mainline capacity to the California border by 140,000Dth/d. The cost of the expansion is estimated at $15-$20 million.