Consulting firm predicts drop for US natural gas prices

Changing market fundamentals could push US natural gas prices down to near $4/MMbtu by early summer, according to Energy & Environmental Analysis Inc., Arlington, Va. It said increased drilling activity boosted gas productive capacity by more than 1 bcfd between the fourth quarters of 1999 and 2000.


HOUSTON, Feb. 5�Changing market fundamentals could push US natural gas prices down to near $4/MMBtu by early summer, according to Energy & Environmental Analysis Inc. (EEA), Arlington, Va.

The consulting firm said that drilling activity has risen since the second quarter of 1999 and increased gas productive capacity by more than 1 bcfd between the fourth quarters of 1999 and 2000.

"With continued increase in productive capacity, gas prices could decline substantially and recouple with residual oil prices by early summer,'' said EEA Director Kevin Petak.

He said it's necessary to look at production trends across a wide range of companies to see the impact of increased drilling.

"While gas production for the top 10 US producers, which accounts for about 30% of all US production, appears to have declined from late 1999 through late 2000, on average, independents and smaller producers are showing significant increases in gas production,'' Petak said. "And total year-over-year production is actually higher.''

EEA said prices have moderated because price-sensitive customers did not take gas in December, and the economy has slowed.

It said weather during the next 2 months will be one of the critical drivers of gas prices for the remainder of this year. "Much colder than normal weather for the remainder of this winter could push gas prices up in February and March and further deplete storage, creating the need for more storage refill that would keep prices high throughout the year. There are still 2 months of winter left, and US gas storage is currently about 1.1 tcf, which is uncomfortably low given the tightness of gas supply and demand,'' Petak said. "In any case, with continuation of high drilling activity, productive capacity will continue to rise this year.''

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