Weekend

Amid a devastating combination of rising temperatures andfalling cash prices the natural gas futures market started the yearwith a crash Tuesday, as commercial and speculative traders alikeliquidated their long positions and added to their shorts. Theprice impact was felt immediately, with the February contractgapping a whopping 10 cents lower en route to a 15.3-cent loss tosettle at $2.176. Despite the sizeable move lower, estimated volumewas a relatively modest 62,491.

Anticipating that high system linepack will continue through theweekend due to low gas demand and limited storage injectioncapability, Tennessee Tuesday issued an OFO Action Alert to takeeffect with Thursday’s gas day. Customers under Rate Schedules SA,LMS-PA, LMS-MA and transportation contracts not covered by abalancing agreement must keep deliveries into the system less thanor equal to scheduled quantities plus 2% (or 500 dekatherms,whichever is greater); takes from the system must be more than orequal to scheduled quantities minus 2% or 500 dekatherms. Tennesseeexpects the alert to remain in effect into the start of next week.

CIG said Friday an OFO begun Nov. 11 (see Daily GPI, Nov. 11) and regarding FT imbalances andand limitations on storage injections would remain in effect throughthe weekend. Based on the latest weather forecasts, CIG anticipatesbeing able to lift the OFO Tuesday. A new bulletin board posting todaywill update the OFO status.

Even as cash prices plummeted 25 cents or more for weekenddeliveries the futures screen managed to push higher Friday astraders looked past the unseasonably warm weather outside theirwindows and focused instead on short and medium range forecasts.After a strong opening at $2.56 the December contract caught a waveof technical buying from both trade and local shorts, allowing itto peak at $2.71 before settling up 12.7 cents at $2.649.

Saying it expects high system linepack due to reduced demand andlimited storage injection capability to continue through theweekend, Tennessee is issuing an OFO Action Alert effective withSaturday’s gas day for its entire system. Under the alert, shipperswill be penalized for daily positive imbalances that exceed a 2%tolerance range (or 500 Dth, whichever is greater) from scheduledquantities. Penalties will not apply to customers who underdeliverinto the system or overtake from it, or to customers under RateSchedule LMS-MA who have elected the Storage Swing Option or Swingon Storage. Tennessee expects the alert to remain in effect intonext week.

In rejecting NiSource’s revised tender offer of $6.1 billion($74/share) over the weekend, Columbia Energy Group’s boardannounced that it authorized management to begin considering alloptions, including a sale of all or part of the company to a thirdparty, possibly even NiSource.

Over the weekend Pacific Gas & Electric issued ahigh-inventory OFO with 10% tolerance on positive daily imbalancesfor Sunday but did not continue the OFO Monday.

Due to rising market-area demand following the weekend, Florida GasTransmission found it necessary to reinstate Monday an Overage AlertDay notice that it had lifted Friday after a three-day run (see DailyGPI, Oct. 4). The low-linepack OFOcarries 8% tolerance for negative daily imbalances and applies to thesystem east of Station 12 (Santa Rosa County, FL). FGT also continuedto extend maintenance at Sabine Pass Plant/Johnson’s Bayou insouthwestern Louisiana, which was originally scheduled to end May 17,1999, but said late last week it was increasing allowable volumesthrough the facility by another 10 MMcf/d, raising its total capacityto 110 MMcf/d.

With moderating temperatures, a hurricane lull and an upcomingholiday weekend pulling the rug out from under bidweek cash prices,the Nymex October futures contract also decided to take the plungeyesterday, plummeting into the $2.70s before settling in thelow-$2.80s and adding to last week’s market dip. Some observersbelieve October is destined to test at least the $2.60s before thisdrop is over.