December US gas prices inflated thanks to 'euphoria'

December US gas prices inflated thanks to 'euphoria': analyst

Washington (Platts)--21Dec2004


Current US natural gas prices should pull back in the coming weeks once
"early-winter euphoria" subsides and market realities set in, analyst Stephen
Smith said Tuesday in his monthly energy outlook. "This December's gas market
can be forgiven if it appears to be a bit jumpy to the upside," Smith said,
explaining that market players usually tend to be bullish early in the heating
season "because all five months from November to March have the potential to
be colder than average." But Smith said if gas storage inventories remain
substantially above historical norms well into January, the market will adopt
a less bullish stance and prices will come down. "We believe that the current
storage surplus qualifies as being excessive unless the first quarter [of
2005] turns out to be considerably colder than most, if not all, current
weather forecasts," he said. "By late January, markets typically begin paying
more attention to storage surpluses and less attention to Arctic cold fronts."
Smith projected a range of $6.50 to $7.50/MMBtu for January bidweek prices.
Assuming normal weather in January, he foresees February bidweek prices of
between $5.50 and $6/MMBtu.

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