Physical markets open to keep gas and power flowing

The physical markets for gas and power opened for business until noon Wednesday in the aftermath of Tuesday’s devastating attacks on New York City and the Pentagon.

With the New York Mercantile Exchange closed, industry worked to insure no disruptions occurred in the flow of natural gas and power to industrial plants, electric generating plants, and other consuming facilities.

“It’s a stable physical market,” said Mark Palmer, spokesman for Enron Corp., operator of Enron Online, an internet market for buying and selling multiple commodities. “The most need is for day gas and day power. As soon as everyone gets what they need, we will close the market again at noon.”

The deadline for purchasing and scheduling gas for the next day’s physical delivery is noon. Most buyers are balancing out daily needs on their existing long term contracts. The New York Mercantile Exchange, the major financial market for trading energy products and a yardstick for energy prices, remained closed. But NYMEX said it could be open for business Thursday.

“Understandably, there is not a lot of liquidity yet in the markets,” said Palmer. But he said the “spreads were tight” in natural gas for the physical transactions. The price of gas as reflected by transactions on Enron Online was only up 5௿½/mcf early Wednesday, he said. The NYMEX contract for October delivery closed at $2.40/Mcf Monday.

Other electronic markets operated by Aquila Inc., Kansas City, Kan., and Dynegy Inc., Houston, also were open for buying and selling physical gas and power. Trading is taking place by telephone and over the electronic platforms.

Palmer said the major concern is making sure buyers of gas and power get what is required to keep the infrastructure functioning. Even though analysts are expecting a temporary “lift” in gas prices in the aftermath of the tragedy, political uncertainty could drive consumer demand down in the economy, said Aliza Fan, vice-president at John S. Herold in Houston.

“Natural gas is very demand driven,” she said. “We were already in a precarious position with demand slumping.”

She said the act of terrorism could tip the country into recession, if consumers reduce their spending. Natural gas demand could suffer more. With the supply side of natural gas not under threat, the outlook rests on demand, she said.

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