The “unbalanced state” of the natural gas market with demandexceeding supply has caused PaineWebber analyst Ronald Barone toraise his average gas price projections by 15 cents for this yearand 10 cents next year over previous predictions, and warn ofpossible severe price spikes throughout the balance of this year.

In his regular research report, NatGas Insight, Barone raisedthe 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 2001he estimates the 12-region composite will be $2.60/MMBtu ($2.75 atHH), up from the previously projected $2.50.

Based on this Barone expects stock prices for natural gascompanies to continue to rise. The PaineWebber analyst raisedearnings estimates to levels ahead of consensus for El Paso Energy,Coastal, Questar, Energen, Equitable and National Fuel Gas. He alsois bullish on Dynegy, Enron and Williams.

The increased estimates are based on predictions of a hot summerand increasing demand for gas-fired peak generation, which in turnwill cripple the summer storage fill. Barone estimates that toreach the targeted 3,000 Bcf storage level by Nov. 1 the injectionrate must be about 74 Bcf a week. Given the current supplysituation and the facts that last year’s fill rate was 60 Bcf/weekand the five-year average was 69 Bcf/week, the 74 Bcf is”unattainable.”

Last week’s natural gas price increase, following on theheat-driven demand in the East, was just the warm-up for “gas pricespikes heading toward $4.00/MMBtu” this summer. NYMEX futuresprices for the summer months have recently registered $3.35 to$3.39.

Ellen Beswick

©Copyright 2000 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.