MARKET WATCH
Warmer weather, nuclear plant problems boost natural gas futures price

Sam Fletcher
Senior Writer

HOUSTON, May 6 -- Spurred by forecasts of above-normal temperatures in the Eastern US and reports of reactor vessel problems at two Southeastern nuclear power plants, the June natural gas contract jumped by 43.4¢ to $5.69/Mcf in light trading Monday on the New York Mercantile Exchange. Futures prices for other energy commodities also increased.

Such a high price for gas hasn't been seen since mid-April, analysts said Tuesday at Enerfax Daily. "Several key nuclear power units experienced outages in Texas, Florida and South Carolina. Although volatilities have been low recently, they will likely increase dramatically in the coming days," they said.

Furthermore, analysts said, "Lack of market participants exaggerated the rally. Many (former) trading companies are no longer around, so funds and locals have a much bigger market impact."

Gas outlook
"We believe US natural gas prices are sustainable in the $4-6(/Mcf) range throughout 2003 and well into2004, mainly because we expect a prolonged period of supply shortfalls," said analysts at A.G. Edwards & Sons Inc., Boston. In a recent report, they listed three factors contributing to tight US gas markets this year:

-- Forecasts of normal to slightly above-normal temperatures this summer, following a period of unseasonably cool weather this past winter and spring.

-- Projections that Canadian gas exports to the US will be flat for the second consecutive year, "even though the Canadian rig count is up 17% from last year."

-- Expectations of low levels of hydroelectric power generation in the northwestern US this year as a result moisture run-offs in that area being 20-25% below normal.

"Gas storage injections are likely to be relatively high this spring, but our working gas-in-storage forecast for Nov. 1 is still a very low 2.6 tcf," they said.

Other futures prices
The June contract for benchmark US sweet, light crudes increased by 82¢ to $26.49/bbl Monday on NYMEX, while the July position advanced 83¢ to 426.30/bbl. Heating oil for June delivery bumped up 2.59¢ to 70.51¢/gal. Unleaded gasoline for the same month gained 2.42¢ to 79.2¢/gal.

The International Petroleum Exchange in London was closed Monday for a public holiday.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes was up 15¢ to $23.99/bbl on Monday.

Contact Sam Fletcher at samf@ogjonline.com

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