---------------------- Forwarded by Lorna Brennan/ET&S/Enron on 12/05/2000 
11:09 AM ---------------------------


webmaster@cera.com on 11/30/2000 09:05:23 PM
To: Lorna.Brennan@enron.com
cc:  

Subject: CERA Insight: The Gales of November - CERA Alert




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CERA Alert: Sent Thu, November 30, 2000
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Title: CERA Insight: The Gales of November
Author: N. American Gas Team
E-Mail Category: Alert
Product Line: North American Gas ,
URL: http://www.cera.com/cfm/track/eprofile.cfm?u=5526&m=1432 ,

Alternative URL: 
http://www.cera.com/client/nag/alt/113000_15/nag_alt_113000_15_ab.html
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Cold November weather, with heating degree-days 22 percent above normal 
through
the twenty-fifth, fueled withdrawals from storage that CERA estimates will 
average
approximately 8.5 billion cubic feet (Bcf) per day for the month, near the 
all-time
record for November set in 1995. This is approximately 5.0 Bcf per day higher 
than
the previously expected withdrawal rate under normal weather conditions. The 
result
is that storage inventories as of the end of the month are about 500 Bcf 
below the
year-earlier level and are on track to dip well into record low territory by 
the end of
the winter (see Table 1).

For December, normal weather would result in storage withdrawals of 17.0 Bcf 
per
day on average for the month. At that rate, storage inventories would fall 
below 2.0
trillion cubic feet (Tcf) by the end of the year, the first time that has 
ever occurred.
By the end of March CERA expects working inventories to be reduced to 606 Bcf 
in
the United States, compared with the previous record low of 758 Bcf.

This weather and high withdrawal rates have moved prices higher within the 
wide
and volatile range between residual fuel oil and distillate, with gas prices 
moving
farther above those of resid ($4.75 to $5.00) and closer to the price of 
distillate fuel
oil (approximately $7.00). Strength in the oil market has kept the 
resid-distillate
range high, but should gas test either boundary of this range, the price of 
either
distillate or resid would move as well. Under normal weather CERA now expects
December prices to average $6.25 at the Henry Hub, a higher level within this 
range
reflective of reduced storage inventories.

Although prices have abated somewhat in recent days and will continue to rise 
and
fall with weather and weather forecasts, fundamentals now are so tight that a 
return
to cold weather would quickly drive prices back above $6.50 and potentially 
above
$7.00 at the Henry Hub. It is only at that level or above that any significant
additional demand response is likely, and even then such a response would 
require
time. The possibility of curtailments of interruptible loads late this winter 
has grown,
while the possibility of significant price relief appears increasingly remote.

**end**

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