Straight

Led by follow-through buying, record-setting heat out West, anda constructive over-the-counter market, natural gas futures eruptedhigher at the open yesterday as buyers propelled the market to newthree and a half year highs. The rally was short-lived, however,and after posting a $3.985 high during the first hour of trading,the June contract tumbled lower under a wave of selling pressure tofinish at $3.747, down 7.8 cents on the day. Estimated volume wasextremely heavy, with 134,429 contracts changing hands.

On a straight partisan political vote, California regulatorsyesterday approved rate relief for beleaguered Southwest GasCorp.’s cost-overrun plagued development of a new natural gasdistribution system for the Sierra Nevada foothill town of Truckee,CA, about 50 miles east of Sacramento in the northern third of thestate.

For the third straight day, unseasonable weather teamed with afalling futures screen to land a knockout blow on price bulls’chins, as only a few cash points escaped losses of more than adime. A huge swath of high 60- to mid 70-degree temperatures acrossthe Rockies, Gulf Coast, Midcontinent and Northeast eradicated anywinter demand yesterday and caused traders to long for the golfcourse instead of the office. Adding fuel to the fire, forecastsare calling for similar weather for the rest of the week.

Riding a wave of bullish emotion, natural gas futures continuedhigher Friday despite forecasts of warming weather expected thisweek. After checking lower at $3.03, the November contract receiveda steady boost of buying pressure from commercials and speculatorsthat enabled prices to push above $3.10 in the early afternoon. Butjust when it looked as if the prompt month would finish the weeknear its high, a late round of pre-weekend profit-taking droveprices down to settle at $3.072, a net-0.8 cent advance on the day.

Natural gas futures chopped sideways for the second straightsession yesterday as traders were torn between shoulder and wintermonth pricing. While the October contract was limited to a tighttrading range and a 0.2-cent advance to $2.632, the Novemberthrough March strip bounded 4.1 cents higher to $2.978. Estimatedvolume was robust with 110,911 contracts changing hands.

Southern Union’s plan to take its merger proposal straight toSouthwest Gas shareholders was dismantled Monday, as SouthernUnion’s two court actions intended on delaying the merger betweenSouthwest and Oneok were rejected. Southwest Gas shareholders areexpected to vote in favor of the merger today. Southern Uniondeclined to comment.

For the fourth straight trading session, natural gas futuresraced off to a fast start Wednesday as locals and speculators triedagain to push the market through key resistance and above therecent trading range. But unlike the failure and subsequent sellingthat plagued the market on the prior three occasions, yesterday’smarket was able to hold on and add to gains late in the day. TheAugust contract finished at $2.253, up 5.5 cents.

In the matchup of East vs. West markets, it was the East by aknockout Friday. While western prices plunged for the thirdstraight weekend, the East relied on existing and predicted hotweather to range from flat to up about a nickel at most points andrealize gains of almost a dime at Northeast citygates. A screenrise of less than a penny was considered a negligible factor inboth regions.

For the second straight Thursday, natural gas traders ignored aseemingly bullish American Gas Association storage report bypressuring the market lower in light, long liquidation. The Junecontract was the hardest hit by the sell-off, slipping 6.4 cents to$2.295 in active trading.