Nat Gas Summer Outlook
This is one opinion
From today's GasDaily…
"Analyst offers bullish view of summer prices
U.S. gas prices will shoot as high as $8/MMBtu this summer thanks to high and volatile crude oil prices and a lack of hydro supplies in the West, according to a new report from Colorado-based Enercast. "While weather is expected to provide basic support to the market, it is not seen as the main driver of higher prices given the high levels of storage," according to the analyst's Spring/Summer 2005 Outlook. With tight oil supplies expected to keep crude trading between $50/barrel and $62/barrel between now and September, both gas and heating oil prices will rise in sympathy, it said. "Increased geopolitical uncertainty, weather-driven demand and strong industrial sector growth are all key factors" in driving energy prices higher, Enercast predicted. "Natural gas demand is expected to remain strong. During the summer period, electric utilities are expected to burn more Btus like natural gas to serve peak load, adding further demand-side pressure as compared to last year."
The report also cited a strengthening El Nino weather pattern that will have a "bullish impact" on gas prices this summer.
Agbeli Ameko, Enercast's managing partner, said the resulting increase in cooling demand in parts of the Northeast, South and Southwest will create higher electricity loads than last summer, which will translate into more gas demand as new gas-fired power plants come on line.
The shortage of hydro supplies in the Northwest this summer due to lower-than- normal snow melt also will squeeze gas supplies as the region turns to new gas- fired electricity plants to fill the demand gap, Ameko said.
Meanwhile, with the withdrawal season winding down, Ameko projected that gas storage inventories will start the refill season at 1.23 Tcf, 12% higher than the five-year average and that net injections will start a week later than usual in mid- April. He based those assumptions on "a combination of both abundant storage and a pretty strong end to the winter in terms of heating degree-days and the increased weather demand, especially in the east consuming region."
Even though May and June are expected to experience slightly above-average storage injections, an expected warmer- than-normal July and August will boost consumption and draw stocks down to within 109 Bcf, or 4%, of the five-year average by the end of summer, Enercast predicted."
AI
