Surpass

Unable to live up to revised storage expectations, the natural gas futures market plummeted lower Wednesday afternoon as traders continued to liquidate new longs. For the third time in three days the September contract tested, but failed to break through resistance in the $3.35-40 area, paving the way for intra- and inter-day profit-taking. The September contract bore the brunt of the selling pressure, spiraling 21.5 cents lower to close at $3.081.

Canada’s upstream energy sector is on a path to “eclipse” 2000’sdrilling pace, and early indications are that this year will showcontinued strength in gas exploration and production — a goodsign that supply may be on the upswing, according to a report byCambridge Energy Research Associates.

Even with December indexes hitting record heights across theboard, swing trading for the first day of the month managed toone-up the bidweek numbers. All points were priced from marginallyto substantially above index levels Thursday.

A casual observer looking back at yesterday’s natural gasfutures trading might take notice of the somewhat narrow 14-centtrading range and not-so-uncommon-lately 12.1-cent prompt monthgain and conclude that Wednesday was just another ho-hum day at theNew York Mercantile Exchange.

Domestic natural gas demand next year will surpass the 22 Tcfmark for the first time since 1972, the Independent PetroleumAssociation of America (IPAA) forecasts. The higher anticipateddemand, which the producer group pegged at 22.56 Tcf, will bespurred by growth in the industrial and residential sectors, withdemand for the former expected to be up 2.5% to 9.14 Tcf and demandfor the latter up by 2.1% to 5 Tcf. The IPAA anticipates a similar2.1% growth for the commercial sector to 3.3 Tcf, but demand byelectric utilities – where the gas industry is pinning much of itshopes for the future – is likely to tumble by 1% to 3.18 Tcf nextyear. It forecasts about another 1.94 Tcf will be consumed as leaseand plant fuel and pipeline fuel. Demand will outstrip domesticsupply of dry natural gas, which is predicted to increase by 1% to18.94 Tcf next year. The majority of the U.S. gas production willbe in the Gulf of Mexico, the group said. Gas imports will accountfor about 3.94 Tcf, up 5.7% from 2000. For oil and natural gasliquids (NGLs), the IPAA estimated domestic production willincrease slightly to 7.83 million barrels per day, while importswill hit 11.30 million b/d. U.S. consumption of oil and NGLs willrise by 1.3% to 19.87 million b/d.

A sample of energy industry experts attending the Dain RauscherWessels Energy Conference in Houston expect prices to strengthentoward the end of this year, only to give way to general priceweakness in 2000. Many of the 146 people polled at the conferencesaid they expected gas prices at the Henry Hub to surge towards$3.10 before the end of this year, then fall to the $2.50 levelearly next year. Overall, 800 energy industry experts, companyrepresentatives, institutional investors and securities analystsattended the four-day conference, which ended last week.

Sumas had the distinction Tuesday of being the first point tosurpass $3 pricing in the current winter heating season, althoughPG&E citygates had gotten as high as $2.92 in the second weekof November (see Daily GPI, Nov. 11). In super-volatile quotes thatranged from the $2.20 area to as high as $3.40 (one source said heheard a $3.50 deal got done), Sumas soared far above an overallmarket that had turned stagnant since Monday’s strong rebound.