PaineWebber Charts Price Peaks
The "unbalanced state" of the natural gas market with demand
exceeding supply has caused PaineWebber analyst Ronald Barone to
raise his average gas price projections by 15 cents for this year
and 10 cents next year over previous predictions, and warn of
possible severe price spikes throughout the balance of this year.
In his regular research report, NatGas Insight, Barone raised
the estimated 12-region composite spot price to $2.85/MMBtu from
$2.50 or the equivalent of $3.00/MMBtu at the Henry Hub. For 2001
he estimates the 12-region composite will be $2.60/MMBtu ($2.75 at
HH), up from the previously projected $2.50.
Based on this Barone expects stock prices for natural gas
companies to continue to rise. The PaineWebber analyst raised
earnings estimates to levels ahead of consensus for El Paso Energy,
Coastal, Questar, Energen, Equitable and National Fuel Gas. He also
is bullish on Dynegy, Enron and Williams.
The increased estimates are based on predictions of a hot summer
and increasing demand for gas-fired peak generation, which in turn
will cripple the summer storage fill. Barone estimates that to
reach the targeted 3,000 Bcf storage level by Nov. 1 the injection
rate must be about 74 Bcf a week. Given the current supply
situation and the facts that last year's fill rate was 60 Bcf/week
and the five-year average was 69 Bcf/week, the 74 Bcf is
Last week's natural gas price increase, following on the
heat-driven demand in the East, was just the warm-up for "gas price
spikes heading toward $4.00/MMBtu" this summer. NYMEX futures
prices for the summer months have recently registered $3.35 to
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