Storage overhang isn’t enough to temper the optimism of EnronOil & Gas Chairman Forrest Hoglund when it comes to the outlookfor gas this year and next. With demand expected to grow andproduction expected to fall – 3% according to Hoglund – on softdrilling activity, the coming months are shaping up to be good onesfor producers.
Articles from storage
Storage overhang isn’t enough to temper the optimism of EnronOil & Gas Chairman Forrest Hoglund when it comes to the outlookfor gas this year and next. With demand expected to grow andproduction expected to fall – 3% by Hoglund’s count – on softdrilling activity, the coming months are shaping up to be good onesfor producers.
El Paso will will allow neither injections nor withdrawals whenit shuts in the Washington Ranch storage facility April 19-25 formaintenance. Saying the project will severely limit its flexibilityin controlling linepack, El Paso asked in advance for customercooperation in “balancing very closely” scheduled receipts anddeliveries.
Despite a disappointing storage report and continuedabove-normal temperatures across the country, natural gas futuresbubbled higher yesterday as technical traders found good value inprices near the bottom end of the recent trading range. And byadvancing 6.2 cents to settle at $1.837, the March contract notonly washed clean Wednesday’s declines but also positioned itselfback in the middle of the $1.725-925 trading range. Estimatedvolume was a somewhat lackluster 61,716 contracts.
Normally natural gas futures are influenced by a hodgepodge offactors: storage, technicals, support, resistance, supply anddemand. Of course last week was anything but normal as a hurricanewhich the market has not seen the likes of since Andrew, wasbearing down on the Gulf of Mexico leaving a wide swath ofdestruction in its wake. Now the question to be answered is whetherHurricane Georges (pronounced ZHORZH) will not only live in theminds of residents of Florida and the Carribean Islands, but alsoin the memories of natural gas traders. That was still a very murkyquestion as of Friday. One thing was becoming evident late lastweek: October’s expiration today will be anything but normal. But,despite the continued threat of storm, the October actually slipped0.2 cents to settle at $2.181 on Friday.
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.
Due to excess supply levels threatening system integrity and aconstraint on storage injections, Sonat implemented an OperationalFlow Order Type 6 effective Saturday. The OFO carries tieredpenalties ranging up to $15/dth for shippers with positive dailyimbalances exceeding allocated volumes by 3% or 200 dekatherms. Forthe same reasons as above, Sonat began a production areapoint-specific OFO Type 5 for nine points on its 26-inch Main PassArea Line. A penalty of $15/dth is involved for affected shippersor poolers exceeding scheduled quantities by 4%. Finally, an OFOType 1 (force majeure notice) began Saturday in connection withSonat’s retirement of facilities at the Main Pass 127 platform,which involved shutting in the Main Pass 129 and Main Pass 129Redelivery points. The work, which originally had been scheduled tostart on Friday, was expected to last 24-48 hours.
It has been argued the emergence of storage facilities in thenatural gas industry has robbed cash prices of some of theirvolatility during summers and winters and replaced it duringshoulder months. Perhaps a similar affect has happened this pastyear because of mother nature. The El Ni¤o winter, which helpedkeep volatility in check this weekend, may very well be behind theextremely high volatility seen at the New York Mercantile Exchangethis past week.