Strong

Petal Gas Storage Co., a subsidiary of Crystal Oil Co., said theopen season for the proposed expansion of its high deliverabilitysalt cavern storage facility near Hattiesburg, MS, received servicerequests exceeding proposed capacity.

Fueled by Tuesday afternoon advances, the November contractraced out to a strong start on Wednesday. But the rally becameshort-lived when it met with a wall of selling in the mid-teens,leaving the market to finish lower at the closing bell. TheNovember contract settled at $2.041, a 4.3 cent decline for theday.

The Energy Information Administration has lowered its wellheadprice forecast for the year by several percentage points but saidwellhead prices during the first quarter of 1999 should show a hugeincrease (28%) from average prices during this year’s warm firstquarter.

The initial September aftermarket was both above and belowbidweek levels at various Eastern points Monday but decidedlystronger to the West. One trader found Southern California bordernumbers mostly in the mid $2.10s, nearly a dime above bidweekaverages. The situation was similar for Malin and the PG&Ecitygate, which got a little extra boost from a low-inventoryPG&E OFO (see Transportation Notes). “It’s hot here inCalifornia,” said a source, adding it seemed “like everybody wasout buying today.”

Canadian prices were strong Thursday, but it was a verydifferent market south of the border. Nearly all U.S. points werefalling between a nickel and a dime in what several sources agreedwas a “very quiet” trading day near the end of a quiet tradingweek. One marketer said he thinks everybody in the industry wantsto go play golf and say, “See you Sept. 1.”

The futures market received an early boost from hot weatherspreading up the East coast and a strong over-the-counter marketMonday morning, but the buying ebbed sending Nymex spiraling lowerthroughout the day. “We shot up to $2.20 in a hurry, but the marketcould offer no follow-through above that level. At that point itwas a where-do-we-go-from-here mentality and the answer to thatquestion was down,” an analyst said. That left the August contractoff 7 cents to $2.095.

Except for a couple of Western regions, cash prices Mondayfailed to realize the strong post-holiday recovery from Thursday’splunging numbers that sources had expected. Weakness in the futuresscreen acted as an obvious drag on Eastern prices, which weremostly flat to less than a nickel higher. And one trader felt thelarger upticks in the Rockies and San Juan Basin and at theCalifornia border were more a case of “them being so weak justprior to the holiday” than any great strength in Western markets.

The American Gas Association released a study yesterday thatforecasts gas consumption growth of 40% by 2015, fueled by strongindustrial demand growth, the dominance of gas-fired generation innew power plant construction and the popularity of gas in new homeand commercial construction. AGA projects gas will expand its shareof the U.S. energy market to 28% in 2015. Consumption is expectedto rise to 31.9 quadrillion Btus (roughly 31 Tcf) from about 22.9quads in 1997.

Traders love to fill in chart gaps and Monday’s strong open leftnot a wide chasm, but a small and clearly defined gap between $2.04and $2.05. To that end, sellers wasted no time Tuesday in pushingthe July contract lower. And once the gap was filled in thecontract continued to fall, settling at $1.989, down 11.1 cents.