Soar

The gas futures market toppled its Berlin Wall last week, atechnical downtrend that has confined trading since December 1996.A number of fundamental factors, including tightening supply,peaking cooling demand and some very significant technicalindicators, conspired to boost the near month contract up 34.1cents to $2.528/MMBtu and the 12 month strip up 19 cents to $2.61from the previous Friday.

The geographic divide between gas markets seldom has been moredistinctive than it was Friday. Opposite corners of the U.S.represented the extremes: Northeast citygates skyrocketed by nearly20 cents while the OFO-hit Southern California border plunged byabout 20 cents. In general it was another case of East being Eastand West being West, and the twain had almost nothing in common.

Enron Corp. turned in second quarter results that beat WallStreet expectations. Also yesterday, Enron Energy Services (EES)announced its biggest energy outsourcing deal yet, and the parentcompany touted its nascent communications business to analysts,saying Communications, which plans to enter bandwidth trading, nowwill be classified as a core business. While the company’s energyservices business continued to lose money, it still appears to beon track to at least break even in the fourth quarter, the companyand analysts said.

Traders who had been pleading for more market volatility duringa long period of relatively little price movement got it in spadesMonday-at least the ones who deal in eastern markets did. Numbersin the East rose by anywhere from 10 to 20 cents, with many pointsup by 15 cents or more. Western increases were considerably moresubdued; many were only a nickel or so, with San Juan Basin’suptick of about a dime leading the region.

Sumas prices were subsiding Monday from their sky-high levelsgoing into the weekend, but the same severe cold front that hadgoosed Sumas as high as $25 Friday caused a moderate supply crisisin Northern California that pushed PG&E citygates up to $10 andMalin to $5. Most points in the overall market rose between anickel and 50 cents as an Arctic cold front was expected to leaveFlorida as about the only warm area left in the U.S. and Canada bytonight.

The gas industry’s share of the U.S. energy market is projectedto soar to 35% in 2010 from just 24% in 1996 if the U.S. followsone possible scenario to meet the requirements of the Kyoto Treaty,the Energy Information Administration said in a report to Congress.In contrast, the industry will grab only two percentage points moreof the energy market over that same period without the treaty.

Last week gas buyers were pooh-poohing the “hurricane hype” theyhad been hearing earlier about Tropical Storm Charley. Well, sorry,Charley, you may have been a small fish when it came to impactinggas production, but Earl is the real thing.

Cash traders apparently decided to ignore a relatively bearishstorage report, a retreat in Wednesday afternoon’s Access futurestrading and a further small downtick on the screen Thursday.Instead they focused on Wednesday’s jump of almost 20 cents inregular futures business and tried to match it in cash businessThursday-coming close in the cases of Agua Dulce and NGPL-SouthTexas, which both rose about 14 cents. Other points moved up in thevicinity of a dime. Standout exceptions were Malin andintra-Alberta, which managed increases of only a nickel or so. Themildness of the Malin uptick occurred even though PG&E failedto extend Thursday’s OFO.

This week’s run-up in cash prices apparently hadn’t run out ofsteam completely Wednesday, but most of the new increases weresmall, and several points either flattened out or, as in the caseof Northern Natural-demarc and Chicago citygates, were starting toretreat from their previous heights.