FW:

-----Original Message-----
From: Arnold, John
Sent: Thursday, October 11, 2001 7:01 PM
To: Lavorato, John
Subject:

The y/y spreads have come in decently over the past week and a half. The 2/10 spread has moved from 104 to 94. It may be a good time to move the 3-10 to a cal 2 trade. Pira just gave their seasonal conference in NY and they are very bullish long term gas.
Pira's
forecast Nymex
Cal 2 2.45 2.99
Cal 3 3.00 3.31
Cal 4 3.70 3.40
Cal 5 4.00 3.48
Cal 6 4.10 3.57
Cal 7 4.20 3.66
Cal 8 4.30 3.75
Cal 9 3.60 3.84 (TransAlaska Highway Pipeline)
Cal 10 3.80 3.93
3-10 3.84 3.59

Regardless of what you think of Pira and long term price forecasts, the rest of the market does listen. They have a tremendous amount of respect in the industry and affect how customers and producers hedge. The flow, which has been buyers over for the way backs, I think will get more pronounced, especially if the front goes down.

In the past week, I've sold Duke 40,000/d Cal 6-10 and 25,000/d Cal 7-10. I've sold PGE maybe 30,000 day Cal 4-5. The only seller has been El Paso whom I believe is hedging production. He is trying to pressure the y/y spreads as a spec trade that I think was/is being done to front run the corp hedges. I've used it as an opportunity to put a lot of spreads away for inventory down the road. If you want to buy this strip back in the next 6 months, I think it's going to be much easier/cheaper to roll it closer.