Home

JOFREE SEES CONTINUED LOW U.S. GAS PRICES

Sept. 2, 1991

U.S. wellhead gas prices will remain low through 1996, Jofree Corp., Houston, predicts. While U.S. demand for gas has increased about 2% since 1989, Jofree says gas supply has increased about 8-9%. "That abundance will dampen gas prices for at least the next couple of years," Jofree Principal Carol Freedenthal said. "Gas markets will improve during the next 3 years but only slightly. "New transportation projects in the Rocky Mountains, new import capability, and incentive driven coalbed methane

U.S. wellhead gas prices will remain low through 1996, Jofree Corp., Houston, predicts.

While U.S. demand for gas has increased about 2% since 1989, Jofree says gas supply has increased about 8-9%.

"That abundance will dampen gas prices for at least the next couple of years," Jofree Principal Carol Freedenthal said.

"Gas markets will improve during the next 3 years but only slightly.

"New transportation projects in the Rocky Mountains, new import capability, and incentive driven coalbed methane and tight sands production will keep supplies high."

Surplus supplies will assure that gas prices remain independent of oil prices, Jofree says. Gas prices will increase about 6%/year and demand about 5%/year until 1994.

Freedenthal said many gas producers have stayed in business despite low profits because of widespread expectations of higher wellhead prices.

"As producers become aware that prices will not rebound short term, a large scale selloff of gas production could cause prices to collapse."

ANNUAL GROWTH RATES

Jofree predicts gas prices during the coming heating season will increase to about $1.75/MMBTU.

During 1992, Jofree expects prices to average $1.40/MMBTU, 5% more than 1991's average but 12% less than in 1990. During summer 1992, gas prices will fall to about $1.20/MMBTU.

During 1994-96, U.S. gas markets will stabilize, with prices increasing about 4%/year.

Despite other more optimistic outlooks, Jofree says larger gains are not likely.

Freedenthal said tax incentives for coalbed methane and tight sands production are partly to blame for the condition of U.S. gas markets. The effect on markets will grow through 1992 as more gas qualifying for federal tax credits is produced from nonconventional sources.

The deadline is Dec. 31, 1992, for spudding qualifying coalbed methane and tight sands gas wells.

Jofree predicts oil prices will remain stable for the rest of 1991 at about $20-22/bbl but could sink to $16/bbl in 1992 as world markets struggle to absorb resurgent Kuwaiti production and presently embargoed Iraqi oil.