Natural Gas Daily
REX work sends Rockies cash tumbling below $1

Wednesday, September 10, 2008

After a brief but high-profile skirmish involving several shippers and the Federal Energy Regulatory Commission, Kinder Morgan went ahead with its plans to start hydrostatic testing today on the Rockies Express Pipeline, sending spot prices at key Rockies points plunging as much as $4/MMbtu to their lowest levels since November. Prices on Kern River Gas Transmission at the Opal, Wyoming, plant traded between a low of 45 cents and a high of $1.65 to average around 70 cents. Northwest Pipeline's Wyoming pool and Colorado Interstate Gas also dropped to 10-month lows as they average 55 cents and $1, respectively.

Prices moved steadily higher throughout the session, however, as players got caught short. "You don't want to be short when it's that low of a price," one Rockies trader said. "Every spread out of Dodge is so deep in the money there's no way a shipper is going to want to be stranded there trying to by gas. Not at these prices." Spot prices were "around $5 on Friday for Monday [flow] because of a bit of cold weather, but all of a sudden it's down to 50 cents?" another regional trader said, noting the that most exit routes out of the Rockies were at or near capacity and "there's not a lot of room to stick gas. If [testing] has been postponed, it wouldn't have this much of a bloodbath."

Kim Ward, director of energy analysis with BENTEK Energy, concurred, noting that "it would have been a lot more beneficial to the shippers themselves if [Kinder Morgan] had chosen a month other than a shoulder month to have maintenance. Prices get depressed at this time anyway, so they just made it worse." Shippers had petitioned FERC to force a postponement but the commission declined to do so on Tuesday.

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