Short

After tumbling 5% on the release of a bearish storage reportWednesday, the natural gas market clawed its way back up yesterdayas locals were forced to cover shorts after watching stubbornsupport in the $3.90s hold yet again. With that buying pressure,the August contract finished 13.5 cents higher at $4.166, recoupingmore than half of Wednesday’s losses.

Vector Pipeline President Juri Otsason said the 720 MMcf/d pipelineproject from Chicago to Dawn, ON, is running a little behind scheduleand probably will not be in service until the end of October. Itoriginally was expected to be in service Oct. 1. He also said theresults of a recent Vector open season were disappointing despite thecompany’s new contract with NIPSCO, which was announced earlier thisweek (see Daily GPI, June 28).

Although officials at the Northeast Power Coordinating Council (NPCC), which oversees electric power grid reliability for Northeastern North America, are forecasting sufficient electricity supplies to meet demand this summer, they cautioned last week that reserves are low.

Although officials at the Northeast Power Coordinating Council(NPCC), which oversees electric power grid reliability forNortheastern North America, are forecasting sufficient electricitysupplies to meet demand this summer, they cautioned yesterday thatreserves are low.

Although gas futures prices could take a short-term dip,possibly below $2.65, followed by a small rebound, by late May,Susannah Hardesty, president of Energy Research and Trading,expects prices to be solidly above $3, maybe as high as $3.30. Andshe’s not alone. Given the significant hype about the increase ingas-fired generation and the surge in peak summer power needs,Cynthia Kase of Kase and Company said this market could soar tounexpected heights.

Although the tight supply/demand situation for gasoline took thespotlight in the Energy Information Administration’s Short-TermEnergy Outlook last week, the EIA was pretty bullish on natural gasas well. The administration has gas demand rising 3.5% this year to22.17 Tcf and 4.1% next year to 23.08 Tcf. It projects a major 22%wellhead price hike this year to an average of $2.56/MMBtu followedby a much smaller rise in 2001 to $2.61. EIA sees dry domestic gasproduction inching up about 1% this year and only about 0.2% in2001. Imports are seen rising 8.3% this year to 3.67 Tcf and 2.7%next year to 3.77 Tcf.

Although you couldn’t tell from rapidly depleting gas storagelevels or lofty gas prices, this winter turned out to be thewarmest on record for the United States, according to a report bythe National Oceanic and Atmospheric Administration. And it was thethird winter in a row in which record warmth cooked the UnitedStates.

FERC has accepted and suspended subject to refund four negotiatedparking and lending (PAL) agreements between Koch Gateway Pipeline andits marketing affiliate, Koch Energy Trading (see Daily GPI, Feb. 18 andFeb. 25). In addition, the Commission has scheduled a technicalconference on the matter to explore what it called “serious concerns”raised by protesters about Koch’s dealings with its affiliate and useof its negotiated rate privileges. The Commission in August 1996granted Koch’s negotiated rate authority.

El Paso Field Services continued its strategy of growingshort-term earnings in its midstream business while working tosecure long-term strategic gas supply for its affiliated pipeline,El Paso Natural Gas.