Short

Propelled by forecasts calling for a warmer-than-normal summerand following on the heels of Thursday’s technical rebound, naturalgas futures finished the week on a positive note Friday, ascommercial and speculative traders covered shorts ahead of theweekend. After gapping higher at the open, the April contracttraded quietly for much of the session Friday, finishing 10.8 centsstronger at $5.035.

Last week’s yo-yo market pattern continued into the weekend asprices reversed direction once again Friday, falling between 15 and50 cents at nearly all points. California remained the contrarymarket with larger declines at the border and Malin and the day’srare uptick at the PG&E citygate.

While California state lawmakers finally rushed to deal with theshort-term power supply crisis on Friday, the financial conditionof Southern California Edison (SCE) and Pacific Gas & Electricmoved closer to the terminal stage. So far the measures passedappear inadequate to cure the utilities’ financial woes, accordingto many observers. Unless creditors see some ray of hope incontinuing legislative action they soon could force the utilitiesinto bankruptcy.

A key ingredient in reformulated gasoline, methyl tertiary butyl ether, or MTBE, may soon be in short supply because of the rising price of natural gas. Friday, independent Valero Refining Corp. said it has cut its MTBE production 7,000 bbl/d from its only production plant because of the high costs.

Discounting recent short-term predictions for warmer weather,Salomon Smith Barney added another 75 cents to its gas priceforecast for this year. The prediction now totals $5/MMBtu at thewellhead or about $5.15 at the Henry Hub, but SSB still fears itmay be too low given the storage and gas production situation.

Discounting recent short-term predictions for warmer weather,Salomon Smith Barney added another 75 cents to its gas priceforecast for this year. The prediction now totals $5/MMBtu at thewellhead or about $5.15 at the Henry Hub, but SSB still fears itmay be too low given the storage and gas production situation.

If you think it’s frigid now, next week is going to be “brutal,”according to a short-term weather forecast issued by Salomon SmithBarney yesterday.

The staff of the Federal Trade Commission’s (FTC) Bureau ofEconomics and of Policy Planning said it generally supports theshort-term and long-term remedies that FERC has identified for theCalifornia power market but believes FERC should provide moreconcrete advice on how best to configure the organization that willoperate and control the transmission grid in the state. In commentsfiled with FERC this week, the FTC said FERC should considercreating a benchmark or a baseline of characteristics andoperations for regional transmission organizations that can be usedas a starting point as part of its revisions to California’swholesale electric power market rules and institutions. Inaddition, the comments suggest refinements to FERC’s proposedremedies to ensure that market power is not exercised in wholesaleelectric power markets, to the detriment of consumers. FERC OrderProposing Remedies for California Wholesale Electric Markets wasreleased Nov. 1 (see Daily GPI, Nov. 2). The order was intended toremedy deficiencies in market rules and institutions that havecontributed to recent reliability difficulties and high prices forelectric power in California.

It was short but sweet for bulls in Wednesday’sholiday-abbreviated trading session as gas futures rebounded froman early and brief foray into negative territory to notch its 15thgain in 17 trading sessions. Adding to a $2.00-plus price spike offlows etched Oct. 31, December clawed 16.9 cents higher Wednesday toclose at $6.577. Meanwhile January finished up 15.2 cents at $6.584after posting a new all-time commodity high at $6.70.