Temperatures

With temperatures going to highs in the 70s and 80s Tuesday,California started into a second day of rolling blackouts at 9:20a.m. PST, but cut them short in the afternoon as two key generatorswent back online and new supplies arrived from the Western AreaPower Administration (WAPA). At press time the early evening peakdemand was still in doubt, and it was possible blackouts wouldstart again.

In response to recent mild temperatures and tame storagewithdrawals, natural gas spot prices are expected to fall further,possibly as low as $5.50/MMBtu by the next reported index,according to analysts with UBS Warburg. The level is far below the$7.00 mark the firm predicted in January.

In a frenetic trading session that had even the most seasonedtraders on their toes, gas futures gapped higher on the open onlyto crumble lower in two distinct selling waves yesterday. Incontrast to Wednesday session that saw almost uniform increases,Thursday’s price action for the 12-month strip was inconsistent,with losses in the out months outpacing the 7.7-cent declineregistered in the prompt month. The March contract finished at$6.158.

As a result of near-freezing temperatures in the state ofFlorida, Florida Gas Transmission issued an Overage Alert Daynotice Friday with a 15% imbalance tolerance.

Citing forecasts of moderating Midcontinent temperatures,Williams said it will lift a systemwide OFO this morning. The OFOwas issued Dec. 16 (see Daily GPI, Dec. 19).

A revised National Weather Service forecast, expanding theprediction of below normal temperatures for the Christmas weekendto the entire United States except for the sparsely populated UpperPlains, kept most prices from softening Friday, as some hadanticipated. Except for the still-most-expensive West Coast market,all other points realized gains from about a dime (San Juan Basin)to a little more than 50 cents (Northern Natural Gas market area).

MRT is lifting today a System Protection Warning that had beenimplemented Tuesday (see Daily GPI, Dec. 12).

The fundamental of having snow and/or frigid temperaturescontinuing to pervade most markets was still around, but cashtraders must have been looking at hints that at least a moderatethaw might begin in several areas today. They again sent priceslower by about a dollar or more Wednesday in most cases.

A rebound from last week’s swing price weakness came sooner thanmany traders expected, but it happened for precisely the reasonthey had anticipated. “When we finally get some cold weather,prices will start turning upward again” summarized the conventionalwisdom of a number of traders last week.