Market watch, Dec. 11

A massive column of Arctic cold pushing into the US should buoy natural gas futures prices through the rest of December, said Robert Morris, senior energy analyst for Salomon Smith Barney Inc. The January gas contract hit a new high of $8.58/Mcf Friday on the New York Mercantile Exchange, up 21.1� for the day


A massive column of Arctic cold pushing into the US should buoy record high prices for natural gas futures through the rest of December, a top energy analyst reported Monday.

"Heating demand is projected to remain unusually high into at least the second half of December as weather forecasts call for a continued flow of Arctic cold into the US," said Robert Morris, senior energy analyst for Salomon Smith Barney Inc., in his weekly report.

"In fact, forecasts for this week show a massive Polar air mass�approaching, in industry terms, the severity of a 'Polar Pig'�surging into effectively the entire continental US, causing what appears to be record cold temperatures in some regions to unseasonably cold temperatures across major metropolitan centers," he said.

A "pig" is a mechanical unit that is forced through a pipeline to purge and clean it.

With some 503 bcf of gas currently in storage, 17% less than last year, industry officials are expected to report this week withdrawals of 145-160 bcf, compared with a pulldown of 73 bcf during the same period in 1999, Morris said.

The January contract for gas finished the week at a record $8.58/Mcf Friday on the New York Mercantile Exchange, up 21.1� for the day, to wipe out Thursday's 11.2� decline from the previous record of $8.49/Mcf on Wednesday.

International oil futures prices declined last week as Iraq seemed about to end its weeklong ban of oil exports, however. The January contract for benchmark US light, sweet crudes fell 91� to $28.44/bbl Friday on the NYMEX, while the February contract lost 92� to $28.09/bbl. Both contracts moved up in after-hours electronic trading Monday to $28.78/bbl and $28.37/bbl, respectively.

Over the weekend, United Nations officials approved prices for Iraq's December oil shipments, which should allow that country to resume its oil-for-food exports. That could put additional pressure on international oil prices this week, Morris said.

The January contract for home heating oil dropped 4.87� to 94.42�/gal Friday on the NYMEX, while unleaded gasoline for the same month fell 3.01� to 73.66�/gal.

In London, the January contract for North Sea Brent fell through key support at the $27/bbl level to close at $26.56/bbl Friday, down 91� for the day on the International Petroleum Exchange. Analysts said Brent crude is still seeking a stable floor in that market.

The January contract for natural gas lost 10� to the equivalent of $4.08/Mcf on the IPE.

On the Singapore exchange, North Sea Brent crude oil for January delivery fell 91� to $26.56/bbl. The February position fell 78� to $26.65.

The average price for the Organization of Exporting Countries' basket of seven crudes plunged by $1.41 to $24.79/bbl Friday.

But for the full week, OPEC's basket price averaged $27.25/bbl, down from an average $30.92/bbl the previous week. That basket price has averaged $27.87/bbl so far this year, up sharply from annual averages of $17.47/bbl in 1999 and $12.28/bbl in 1998.

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