Weak

Weak natural gas prices in the third quarter have so far moved Alberta Energy Co. Ltd. to escalate a maintenance program and reduce its produced gas volumes by about 50 MMcf/d. At Burlington Resources Inc., total third quarter production actually increased 2%, but analysts noted on Thursday that the Houston-based producer probably will be an exception to the rule for the next three quarters — as producers face the likelihood of lower earnings until energy prices rebound.

The current increase in the availability of natural gas in the U.S. is caused 25% by an increase in supply and 75% by a decrease in demand, Chairman Mark Papa of EOG Resources said Tuesday in a financial conference call, continuing to project an increased supply response this year of only 1% to 1.5% relative to last year (see Daily GPI, May 10).

No fooling; the April aftermarket remains quite weak in its early days. San Juan Basin/Rockies quotes dipped as low as the $3.20s Monday amid an overall market dive that saw nearly all points dropping by a quarter or more. Only a moderate rise of a little more than a dime at the Southern California border, leaving it only about a dime shy of the April index, went against the overall softening tendency.

In three distinct selling waves, natural gas futures plummetedlower yesterday as traders liquidated long positions andestablished fresh shorts amid a bevy of bearish fundamental news.Feeding off losses incurred in the overnight session, the Februarycontract gapped down at the open Wednesday and shuffled lower tothe $7.50 level by 2 p.m. (EST).

While Mondays have been a bear trader’s best friend, Wednesdays(last week’s Wednesday excepted) have given bulls a reason to smilelately and yesterday was no exception as prices moved higher in twodistinct buying binges.

In what has become almost a routine, natural gas futures coastedto another sizeable gain Friday as traders bid up the June contractin an expiration-day buying frenzy. With no fresh news in which tosink their teeth, traders were content to chew on concerns thatstorage is growing at too slow a pace to match predicted demandlevels, both this summer and next winter as reasons for the rally.Becoming the first contract to post a final settlement above $4.00,the June contract notched an impressive 17-cent gain to settle at$4.406 after peaking at $4.50 during a volatile final 30 minutes oftrading.

Both the April swing and May baseload markets were reportedgetting slightly softer Wednesday, mostly because of a small screendownturn and an approaching end of Northeast chill.

Other than moderately cooler weather in the West, traders couldfind little fundamental support for cash prices Wednesday yet stillmanaged to push them higher at most points by small amounts ofabout a nickel or less. Two or three Northeast points were the onlyones exhibiting slight softness.

Scorching summer heat, high oil prices and a weak hydropowersupply should lead to a significant increase in gas demand thisyear, according to a report issued last week by Friedman, Billings,Ramsey & Co., Inc. (FBR), a Virginia-based financialinstitution. Prices will probably increase throughout the summer,the firm predicted.