What was widely considered a bearish storage report combinedwith falling Nymex futures prices to deal the cash market a losinghand Thursday as most delivery points lost about eight cents onaverage.
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It took a while longer than many traders had counted on, but thewidely expected recovery from last Thursday’s falling pricesfinally came to pass Wednesday. The upticks were broadly based butdiverse, ranging from 2-5 cents at many Gulf Coast and Midcontinentpoints to 10-15 cents in the California market.
Cash prices were coming down by as much as a dime or more insome cases Thursday, as was widely expected, and many sourcespredict more of the same for the holiday weekend. A moderatingweather trend in hot areas and coolness in the West, Midwest andNortheast certainly aren’t conducive to any market rally attempts,one trader said. And then there was the futures screen’sleadership, or lack thereof, a marketer said. Northeast market-areaprices were down 3-4 cents at first, then dropped another 3 centsafter seeing the screen’s example, he said. He was getting lateTransco Zone 6 (non-NYC) offers at $2.34 after having bought at$2.36-37.
Cash price changes for the weekend varied widely, ranging fromrelative flatness in Appalachia and Northeast citygates to drops of10-20 cents at the California border. The big weakness inCalifornia numbers was due to trader fears of weekend OperationalFlow Orders by SoCal Gas and PG&E, whether or not they evermaterialized, sources said. (Neither utility had an OFO in effectas of Saturday.) However, SoCal was cutting all as-availablestorage injections, helping to keep Topock prices depressed, amarketer said.
Although it is widely believed the collapse of crude oil pricescould force many producers to cut back drilling plans this year,Unocal Corp. was the first company to formally confirm ityesterday. Unocal said it will prune its capital spending by about$250 million to $1.3 billion. According to CEO Roger C. Beach thecapital expenditure reductions will come in three areas: near-termproduction projects that are most heavily affected by lower currentcommodity prices, investments in non-oil and gas businesses, andlonger term exploration projects that could benefit from more dataevaluation. The move probably will not have a significant impact onUnocal’s natural gas production, a spokesman said, adding however,some associated gas production could become a casualty in thecutbacks. No specifics were available.