The Lehman Brothers investment firm has raised its 2001 natural gas price forecast from to $6.25/MMbtu from $5, and its 2002 forecast to $4.50 from $4.15. However, it said, high prices have decreased demand markedly.
It said, "Falling US production and cold weather have led to rapidly falling natural gas storage levels and high prices.
"Natural gas storage levels are at historic seasonal lows�and they are likely to remain at historic lows all year. We expect working gas inventory levels of only 200-400 bcf at the traditional end of the heating season (Mar. 31). This compares to a 5-year average level of 968 bcf and to 1,031 bcf last year."
The firm said the storage shortfall is equal to about 6-7% of production over the 7-month refill season.
It also said that it believes industry will not be able to make up the shortfall and that inventories will be low going into next winter as well. This will boost prices going into 2002, said a statement.
"Clearly current high prices are causing decreases in consumption by many industrial and perhaps commercial customers. � Fourth quarter spot natural gas prices average about $6.25 and we believe that this high price caused a decrease in non-heating demand of 2.9 bcfd. Thus we expect that a first quarter average price of $8-10/MMbtu would cause an even larger demand response."