Oil prices, weather to dictate US gas prices this summer: analyst

Washington (Platts)--24May2004

Global oil prices likely will prove a dominating influence on US natural gas
prices in the coming months, said analyst Ron Denhardt of Strategic Energy &
Economic Research in a report released over the weekend. "Natural gas prices
have increased in sympathy with oil prices" for several weeks now, "and the
natural gas price outlook for the remainder of the non-heating season will
depend primarily on oil prices and weather," Denhardt said. Saudi Arabia last
week offered to increase its output to 9-mil b/d beginning Jun 1, an
"important" step which would "truly add more oil to the market, rather than
simply formalizing existing overproduction by the group's members."

However, while increased production should gradually cause oil prices to fall,
"the next few months could be dominated by concerns about stability in the
Middle East," which could keep prices high regardless of increased Saudi
production, Denhardt noted. And "until and unless there is strong evidence
that working gas storage is likely to be close to capacity," meaning roughly
3.3 Tcf in storage by Nov 1, "gas prices will probably move in concert with
oil prices," Denhardt concluded.

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