Surprisingly

Cash prices moved sharply lower on Friday for the Columbus Day weekend despite the surprisingly rapid rise in the natural gas futures market. While November futures ended the day up more than 30 cents, mild weekend weather and weak demand left cash with nowhere to go but down. Most points tumbled 10-20 cents, which put many locations back down near bidweek levels.

Not surprisingly, federal and state witnesses disagreed over the future stability of California’s energy infrastructure and marketplace during a Congressional information-gathering hearing in Sacramento last month that was focused on the state’s independent, nonprofit electricity transmission grid operator, Cal-ISO. The chairman of the U.S.House Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs, Rep. Doug Ose (R-Woodland) set up shop in his district to hear from a number of state officials, along with Patrick Wood, chairman of the Federal Energy Regulatory Commission.

Canadian producers have been surprisingly effective in increasing producing despite steep wellhead decline rates and expectations that the response to drilling would be weak, according Lehman Brothers. Data recently released by Canadian pipelines shows gas production was up 9.3% or 1.3 Bcf/d in November from November 2000, which was following the 8.4% increase in October. However, E&P expenditures are expected to be down 20% this year and rig utilizations already have dropped by 21%.

Canadian producers have been surprisingly effective in increasing producing despite steep wellhead decline rates and expectations that the response to drilling would be weak, according Lehman Brothers. Data recently released by Canadian pipelines shows gas production was up 9.3% or 1.3 Bcf/d in November from November 2000, which was following the 8.4% increase in October. However, E&P expenditures are expected to be down 20% this year and rig utilizations already have dropped by 21%.

From a mixed performance the day before, the cash market went to a virtually united show of strength Tuesday. A large majority of the upticks were in double digits, but some — mostly in the Gulf Coast — were less than a dime.

There was no surprise when prices continued to fall Friday, but what many didn’t expect was eastern quotes holding up as relatively strongly as they did. Nearly all points in the East fell by about a dime or less, and a few scattered ones eked out small gains. Meanwhile, the West fulfilled predictions of steep drops that were fueled primarily by high-linepack OFOs by both of California’s biggest LDCs.

The Western Gulf of Mexico lease sale 180 held in August by the Interior Department’s Minerals Management Service (MMS) “while not horrible, was not as spectacular as one might have originally thought,” according to a Stat of the Week by Raymond James energy analysts. The analysts noted that despite the “record levels of cash flow, pristine balance sheets, and what appears to be a general lack of prospects” for exploration and production companies, the “firecracker lease sales seem to have fizzled out.”

Last week’s Western Gulf of Mexico lease sale 180 by the Interior Department’s Minerals Management Service (MMS) “while not horrible, was not as spectacular as one might have originally thought,” according to a Monday Stat of the Week by Raymond James energy analysts. The analysts noted that despite the “record levels of cash flow, pristine balance sheets, and what appears to be a general lack of prospects” for exploration and production companies, the “firecracker lease sales seem to have fizzled out.”

Not surprisingly, the energy industry last week was almost evenly split over the issue of whether FERC should re-impose price caps on short-term capacity-release transportation to the California border, with California regulators, utilities, industrial customers and producers in favor of the action, while interstate gas pipelines, power marketers and independent generators serving the state, and local distribution companies (LDCs) want to stick with the status quo.