Spring

With the official start of spring, time began to pressCalifornia’s wide-ranging efforts to fix past, present and future(short-and long-term) energy problems. For every positive lastweek, there seemed to be greater negative developments to dealwith, rolling blackouts being the most dramatic. By last Friday,the prospect for bigger problems ahead seemed unavoidable.

A decision is promised by spring on moving forward with aproject to increase natural gas production offshore of Nova Scotiaby at least 80%.

Just when you thought Florida was the place to be this springfor pipeline construction, the ice is melting and activity isstarting to blossom on the Northern frontier -think Alaska andthe Northwest Territories.

With power projects cropping up faster than spring dandelions,an alarming disconnect has occurred between generation andtransmission in several regions of the U.S., according to PaulParshley, director of North American Electric Power for CambridgeEnergy Research Associates.

It has been a good spring for bull traders at Nymex. SinceFebruary 26, the now-spot June contract has rallied nearly 70 centsto trade as high as $2.40 last week. But just as constructivetechnicals and low storage injection figures seemed to point tocontinued strength, the market spiraled lower Thursday and Friday.And while long liquidation spurred by the bearish one-two combo ofnuclear units coming back on line and moderating temperaturesacross the country were as good as reasons as any for the marketturning lower, traders remain divided as to the price directionheading into the summer. June finished the week mixed at $2.273, 2pennies above its close from the prior Friday, but 2.2 cents lowerfor the day.

With weather forecasts producing bearish news at every turn andnational storage reserves looming ever larger, Raymond James &ampAssociates recently published a report projecting spot wellhead gasprices will drop below the $1.50/Mcf level before the beginning ofsummer. The study, however, also warns of a gas “price shock” inearly 2000, when gas shortages run rampant and production is unableto keep up because of sharp declines in exploration and productionspending. It seems the industry is in store for a spot marketroller coaster ride.

The seesaw battle continued Wednesday in the natural gas pit atNymex, but in contrast to the modest gains posted during tradingMonday and Tuesday, yesterday’s session saw the bears regaincontrol. After opening at what would be its high for the day, theMarch contract drifted 6.3 cents lower to settle at $1.775, just apenny off its low.

The futures market gave an early “head fake” — pointing lowerat the open — but support held and the market picked up momentumthroughout the trading session Monday. The December contract spikeddramatically higher near the close, registering a 11.2 cent advanceto $2.387. Despite the large trading range, volume was a little onthe light side with only 50,263 contracts changing hands.

The Gulf Coast from Brownsville, TX, to Spring Hill, FL, hasbeen hit by 34 intense hurricanes this century, and there’s a highprobability one could make an unwelcome visit in 1998. In his firstlook at hurricane landfall probabilities, esteemed hurricaneforecaster William Gray of Colorado State University said the GulfCoast region is 14% more likely to suffer through an intensehurricane (category 3, 4, or 5) and 16% more likely to be hit by alower level cyclone this year than the average landfall probabilityover the past 98 years.