Could Raymond James Be More Bullish? Not Likely
The gas bulls are firmly entrenched at the St. Petersburg, FL
offices of Raymond James & Associates. The group put out a
report last week projecting either the loss of 5 Bcf/d of gas
demand this winter due to soaring gas prices or an "impossible"
negative balance of working gas in storage at the end of the winter
heating season, given normal temperatures this winter.
"In our normal winter case, year-to-year winter demand should
increase by a whopping 9.3 Bcf/d, or about 1,400 Bcf for the entire
five month winter heating season. The key driver here is that
exceptionally warm winters for the past four winters have masked
the strong economic growth that has occurred in the U.S. over the
past five years."
Raymond James analysts noted that temperatures so far this
winter have been 17% below normal and the National Weather Service
is predicting more of the same for the next couple weeks. Raymond
James expected a 122 Bcf withdrawal to be reported by the American
Gas Association last Wednesday for the previous week's storage
activity despite the holiday, but that rather high number turned
out to be a little lower than what AGA ended up reporting. The
weekly withdrawal came in at 146 Bcf, the largest weekly withdrawal
ever reported by AGA for a week in November. Working gas levels are
not nearly 500 Bcf behind levels at the same time last year and
nearly 300 Bcf behind the five-year average.
"Even if the rest of the winter is 14% warmer than normal, we
are now likely to end up with less than 900 Bcf in storage at the
end of the winter," said Raymond James. "If the rest of the winter
is normal, the theoretical storage deficit should grow to a
negative 293 Bcf."
Raymond James analysts admitted it's impossible to reach such a
level. "History has shown that not only is this highly unlikely,
but the gas distribution system begins to run into significant
problems when gas storage levels fall below 600 Bcf in storage."
The last time that happened was the 1995-96 heating season when
gas prices went through the roof, and Raymond James predicts that
will occur again this winter. "In other words, gas prices must
continue to rise sufficiently to drive as much as 5 Bcf/d of demand
out of U.S. gas markets. What is that price? We have no idea but it
is safe to assume that price will be somewhere higher than $5 and
likely somewhere less than $50/Mcf."
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