Tightening

Pacific Gas & Electric continued a high-inventory OFO thatbegan Saturday (see Daily GPI, Aug. 16)through Monday, tightening an initial tolerance of 5% for positivedaily imbalances to 2% Sunday and then loosening it again to 5%Monday. No OFO is in effect today.

The cash market resumed its climb Thursday, buoyed by a risingHenry Hub futures contract, a tightening supply situation,spreading cold weather and air conditioning load from Texas throughthe Southeast. A “lean” storage report Wednesday afternoon added tobullish sentiment, a marketer said.

The Rocky Mountain Oil &amp Gas Association (RMOGA) has fallenprey to low commodity prices and industry belt-tightening justshort of its 80th anniversary. The trade group plans to shut itsdoors permanently June 1.

Low commodity prices and industry belt-tightening picked off theRocky Mountain Oil & Gas Association (RMOGA). The trade groupsaid it will shut its doors June 1. The move comes amidreorganization of the American Petroleum Institute (API) andfollows talk last year of combining the Natural Gas SupplyAssociation with API. Clearly, the pressure is on to cut costs, andtrade association dues paying has become less of a priority.

A major pipeline group fired off an angry letter Friday askingthe Environmental Protection Agency (EPA) to reconsider a “policydecision” that would force pipelines to shell out at least $280million – money that would have to be diverted from expansionprojects – for “unproven” technology to meet a 90%-reduction targetfor nitrogen oxide (NOx) emissions.

ARCO said it will implement a cost reduction program designed toreduce before-tax costs by more than $500 million over the next twoyears. Approximately $350 million of the cost savings are expectedin 1999. The cost reductions will fall largely into fourcategories: upstream operating and support costs; explorationspending; downstream operating and support costs; and costs for thecorporate center and support services. ARCO’s increasedconcentration on core exploration and production areas and therecent divesting of non-strategic assets have facilitated theadditional cost reductions.

Heavy air conditioning load and a tightening of supplyavailability not only generated a late rebound in bidweek pricesFriday but also pushed up last-of-May and early June aftermarketnumbers in nearly all Eastern, Gulf Coast and Midcontinent/Midwestmarkets. Waha and Permian Basin gas, supported by Texas andMidcontinent cooling demand, also was rising above index levels.But in the generally cool West, weekend and 1st-of-month swingprices tended to go down by a few cents.

The recent tightening of Henry Hub-New York basis can beattributed to a number of factors: the large amounts of capacitybeing turned back to the pipelines, high inventory levels,competitive residual fuel oil prices and new liquefied natural gasprojects, according to a prominent energy trader.