Testing

Following up on an earlier testing of the waters, El Paso Natural Gas announced Tuesday a binding open season for 320 MMcf/d of pipeline capacity from the Keystone and Waha areas of the Permian Basin in West Texas to the California border near Ehrenberg, AZ. The binding open season began July 5 and closes on Aug. 2.

After thrice testing, but failing to break beneath support Thursday, natural gas futures rebounded at the New York Mercantile Exchange as traders put an end to a nine-day, 70-cent price slide. The June contract received the biggest buying boost, closing 4.4 cents higher at $4.527.

Florida Gas Transmission said a Zone 1 constraint resulting fromhydrostatic testing immediately downstream of Station 4 in MatagordaCounty, TX will be completed by Thursday and it is accepting all Zone1 nominations for that gas day. The maintenance period, which beganOct. 20, 2000 and was originally scheduled to end Dec. 1, 2000, wasextended several times (see Daily GPI, Jan.24).

After opening 3 cents above Thursday’s high trade, the newprompt month September moved higher in early trade Friday astechnical buying buoyed the contract near the confluence oftrendline and psychological resistance at $4.00. However, afterfailing to push through that level, traders were content to takeprofits ahead of the weekend. The July contract finished with justa 0.2-cent gain for the session at $3.845.

After testing, but not breaching stubborn resistance at $4.60Thursday, natural gas futures tumbled lower Friday as traderselected to take profits ahead of the weekend. The near-month Julycontract was hit with two distinct selling waves during the firsthour of trading Friday, setting the tone for a session in which thecontract slipped 10.3 cents to finish at $4.448.

After testing the competitive waters, KeySpan Energy saidyesterday it signed a two-year asset and supply managementagreement with Coral Energy. Under the deal, Coral will assistKeySpan in managing all the upstream assets of KeySpan’s gasutilities as well as the fuel supply for KeySpan’s Long Islandgeneration plants. Financial terms of the deal were not disclosed.The contract was awarded following an 11-month review ofcompetitive bids from multiple marketing and trading companies.

In what may turn out to be a Pyrrhic victory, bulls weresuccessful on two fronts Friday — testing resistance at $3.00 andposting a gain for the third straight session. However, thoseachievements may have come at a price because even dyed in the woolbulls were shaking their heads after watching heavy selling enterthe market once prices reached over the $3.00 mark.

What a difference a day can make. Just 27 hours after testingkey support at $2.81, natural gas futures staged a completeturnaround, rallying to its highest daily continuation chartsettlement price this year. Nearly non-existent fundamental factorsgave traders little choice but to rely again on technical tradingtools for price direction. After the May contract posted animpressive gap higher open, that direction was in little doubt. Theprompt contract finished up 6.8 cents at $2.956, just a fraction ofa cent off its $2.96 high and within a nickel of its $3.005all-time high.

After testing both the upside and the downside during the firsthour of trading, the futures market chose the middle road yesterdayas many traders waited on the sidelines ahead of the weekly storagereport. As a result, the November contract did not stray very farfrom center and finished the session up 1.5 cents at $2.601.