US gas prices facing downward momentum as storage rises: analyst

Washington (Platts)--23Aug2004

US natural gas prices will "likely be subject to substantial downward
pressures" if gas in storage approaches the 3.2 Tcf mark, according to
analysts at Strategic Energy and Economic Research. As storage levels move
closer to 3.2 Tcf by the end the traditional injection season on Oct 31, Henry
Hub gas prices are likely to shift downward to an average of $5.20/MMBtu
during September and October, analyst Ron Denhardt said. However, "the actual
October storage level will depend on whether there is a significant loss in
production from hurricanes and weather." 

Throughout the heating season, US gas demand is projected to increase by
roughly 1.4 Bcf/d, while supply is expected to increase by about 400,000 Mcf/d
due both to higher Canadian and US production and additional supplies of
liquefied natural gas, he said. "Thus, the net supply/demand balance should be
approximately 1 Bcf/d tighter than last year."

As a result, gas storage withdrawals during the heating season should be 150
Bcf higher than in 2003, which would leave storage supplies at approximately
945 Bcf at the end of the heating season with an average Henry Hub price of
$6.85/MMBtu.

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