If hurricanes avoid the Gulf of Mexico again this summer, the U.S. natural gas market can expect to see a repeat of last summer when interruptions were at a minimum and prices were basically kept in check, the Natural Gas Supply Association (NGSA) said Wednesday.

"Government forecasters don't believe the heat will be as harsh as last summer, the second warmest on record, but with an increasingly narrow margin of error in terms of supply availability, the still-fresh memory of Hurricanes Katrina and Rita in 2005 is still keeping the marketplace a little jittery," said NGSA Chairman Chris Conway during a press briefing on the group's annual "Summer Outlook" in Washington, DC.

Experts at the National Oceanic and Atmospheric Administration's (NOAA) Climate Prediction Center Tuesday projected a 75% chance that the 2007 Atlantic hurricane season will be above normal. NOAA scientists predict 13 to 17 named storms, with seven to 10 becoming hurricanes, of which three to five could become major hurricanes of Category 3 strength or higher (see Daily GPI, May 23). An active hurricane season was predicted for the summer of 2006, but the oil and gas industry dodged a bullet when it failed to materialize.

NOAA also has predicted a warmer than normal summer in the East, Southeast and West, but near-normal weather throughout most other regions. "If accurate, there may be somewhat less natural-gas fired electricity generation for air conditioning load than last year; This, as a result, will likely put downward pressure on natural gas markets," the NGSA said.

The South will demand the largest percentage of gas-fired power demand this summer at 40%, followed by the West at 22%, the Northeast and South Atlantic at 15% each and the Midwest at 8%, according to the outlook.

Many of the summer market fundamentals -- supply, consumption and storage -- are on par with those of the summer of 2006, the NGSA said. Total average supply is expected to be 60.7 Bcf/d this summer (April through October), including 51.1 Bcf/d of domestic production, 8.4 Bcf/d of Canadian gas and 2 Bcf/d of liquefied natural gas (LNG) imports, the group noted. This compares to a total U.S. supply of 60.5 Bcf/d in the summer of 2006.

While this summer-over-summer supply increase "may not sound like a big deal, it actually represents a remarkable restoration from the devastation of the 2005 hurricanes, leading to another slight increase in projected domestic production during the season," said Conway, who also is president of natural gas and power for ConocoPhillips.

"This recovery served to keep last summer's prices in check despite the near-record heat and first-ever summer storage withdrawals. It's also why we will be able to reliably and competitively meet the projected demand this cooling season," he said.

The NGSA anticipates summer demand will rise modestly to 54.6 Bcf/d from 53.8 Bcf/d last summer. It sees increases in each of the four sectors -- residential, commercial, industrial and electric. "The area of greatest uncertainty is within the power sector," the group said. This "is, in part, due to the weather-sensitive nature of the electric sector's summer gas demand compounded by the current lack of consensus among weather forecasters concerning this summer's weather."

The industry is once again heading into the cooling season with gas storage inventories at high levels. Season-starting gas inventories were estimated at 1,569 Bcf this summer, down slightly from the record level of 1,695 Bcf at the start of the summer of 2006, the outlook said. Although below last year, this summer will see the second highest level of gas in inventory, NGSA noted.

"This will again serve as a moderating influence this summer, with projections for a total fill of 3.4 Tcf by the end of the traditional injection season" in late October, the NGSA said. "To get there, anticipated weekly injections during the cooling season will average only slightly more than last year, 59.5 Bcf instead of 57.2 Bcf in 2006."

Although there will be a "little bit more room in storage" this summer, Conway said he doesn't expect it to have a significant effect on prices.

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