Slight

There was almost no consistency in price movements Wednesday,although a slight majority of the changes were downward. Rises andfalls mixed with each other in the Gulf Coast andMidcontinent/Midwest.

Continued strength prevailed for most of the cash marketyesterday as prices at many points made small gains of 2-5 centswith one major exception: California. Cooler temperatures andforecasts for continued cool weather reduced power demandsignificantly and spot prices for gas at the southern borderplummeted another 15 cents. San Juan prices lost another dime.

Neither the American Gas Association (AGA) storage report of a25 Bcf withdrawal nor a supportive morning futures screen couldlift cash prices yesterday, as most points stayed within a coupleof pennies on either side of flat.

The cash market continued to muddle around Monday in a generallyflat mode with a slight bias to the upside as traders tried toassess whether there was enough cold weather around to reallymatter. To Houston sources donning sweaters for possibly the firsttime this season, the answer might have seemed to be yes, but toothers it was no as they noted the abundance of available storageand the fact that only a few markets were experiencing sub-freezingtemperatures. Most points were flat to a couple of cents higher,with the declines of any size occurring at Northeast citygates(although Transco Zone 6-non NYC bucked the trend there with asmall gain). Northeast weather was rainy but not freezing.

Nearly every trading point continued to build Wednesday on theslight degree of bullishness established on Tuesday. The majorityof increases were moderate, within the range of 2-4 cents. Therewas “just a little more heat” to raise cooling load a notch higher,said a Midcontinent source, and the futures screen literally put inits 2 cents worth with a rise of a little over that amount.

The cash market capped off a week of defying expectations ofsoftness with a little bit of softness, but Friday’s small dropsonce again surprised traders by failing to fall as much as expectedfor a lower-load weekend period. Sources continued to marvel at therelative firmness of prices in the absence of significant heatingload and with the abundance of storage supplies.

Here today; gone tomorrow was the prevailing mentality in thefutures arena yesterday when the coldest temperatures of the yearwere more than offset by forecasts calling for a warm-up by earlynext week. And as has been the case for most of the month, it wascash prices that not only led the way for the futures market, butalso notched a larger change on the day-where the January contracttrickled down, 2.2 cents to settle at $1.925, cash prices sank by adime on many pipes.

The cash market continued to muddle around with essentially nodirection for a second straight day Friday, leaving weekend numbersmostly unchanged. The few drops of about a nickel occurred atWestern points-intra-Alberta, Stanfield, Malin and SouthernCalifornia border-and chiefly resulted from the lifting of supplyand/or transportation constraints that allowed more gas back intothe market.

PG&E Corp. said second quarter earnings suffered because ofcosts associated with electric restructuring and its sale ofAustralian assets to Duke Energy. The company reported earnings of46 cents per share, compared to 49 cents per share for thecorresponding quarter in 1997, and net income of $174 million,compared with $193 million in 2Q97. A lower rate of exchangebetween the Australian and U.S. dollar resulted in a six-centcharge taken during the second quarter, PG&E said.