To date, the heating season (from Oct. 4 through Feb. 6) has been slightly colder — 2.3% colder to be precise — but there has been a trend increase in seasonally adjusted demand, implying that the decline in the natural gas supply will pressure prices in the months ahead to remain at a constant above $4 and higher than $6 if the summer months are above normal, according to energy analyst Stephen Smith.

In his latest energy report, Smith noted that the current heating season has seen the gas storage surplus versus normal patterns reduced by 202 Bcf. “Had the weather been normal, we estimate that the surplus would have been reduced by 100 Bcf over a period of 156 days,” Smith wrote. “This implies that weather-normalized gas demand exceeded gas supply by 0.6 Bcf/d on average for the period…essentially market balance, but this estimate has been trending up as it has been updated over the last few weeks.”

Smith’s data indicate that pressure on the storage levels will keep gas prices “above $4 most of the time, with occasional periods in the $5-$6 range as we have seen recently, with even stronger prices if the summer is hotter than normal.”

Regarding hydro power this year, Smith found that it will be between 15-20% below normal, and “this factor taken by itself will add additional gas demand versus 2002. A post-war break in oil prices is a possible source of easing some of the upward gas price pressure, but our bet is that this won’t have much of any effect in the next six months.”

Smith forecasts a gas storage draw of 127 Bcf for the week ending Feb. 7, which would put gas-in-storage at 1,394 Bcf. This compares with his internal data of a “normal” draw of 133 Bcf, based on a 1994-1998 reference period. The current’ week’s projected draw implies that the gas “shortage” will be decreased by 6 Bcf, from a shortage of 31 Bcf to a shortage of 25 Bcf. In a prior forecast for the week ending Jan. 31, Smith predicted a storage draw of 215 Bcf, “which turned out to be too strong by 7 Bcf.” The actual draw was 208 Bcf.

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