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Duke Trading Arm Expects Stronger Gas Prices

Duke Trading Arm Expects Stronger Gas Prices

Brad Karp, president of Duke Energy Trading and Marketing, told a group of producers in Houston Thursday that his company is pretty bullish on the gas price outlook long term.

"The price outlook for natural gas year 2000 forward is quite robust. The five-year strip price coming out of the year 2000 is $2.40 plus or minus, which is at the high end of the range for where annual strip prices in natural gas have been trading..

"It's clear the marketplace is concerned about the ability of the producing community to keep up with the demand growth. The counterbalance to that for the rest of '99 is inventory levels. We have some 300 Bcf more in inventory than we did at this time a year ago. Those are the two forces that are kind of competing in the marketplace right now, and our hunch is that the inventory concerns are not likely to weigh heavier on the market than the concerns about forward deliverability, at least until you get out into the third quarter and get a better feel for how injections into inventory are going to perform once you get into the peak summer power generation period where there's likely to be pretty healthy demand for natural gas."

Duke Energy Trading and Marketing, owned 60% by Duke Energy and 40% by Mobil, expects "somewhat stable prices for the next three or four months, and then you're likely to get an inflection point in the third quarter where either the marketplace decides that year 2000 forward is the right place for prices to be or the ingenuity and motivation of the producing community is going to keep enough supply available that $2.00 is a more realistic price going forward for natural gas than $2.40. Either way it looks a whole lot better than $1.70."

Karp's company markets all of Mobil's North American gas production, about 1.5 Bcf/d. He said it was premature for discussions of whether Duke Energy Trading and Marketing could end up marketing Exxon's gas production once the Exxon-Mobil merger is completed. "Hopefully by the end of the second quarter here we'll be able to answer that question with something substantive." Karp made his remarks at an Independent Petroleum Association of America (IPAA) luncheon.

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