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AGA Expects Major Market Recovery in 1999

AGA Expects Major Market Recovery in 1999

With a little holiday cheer, the American Gas Association handed out an extremely optimistic 1999 gas consumption forecast last week as a gift to those whose spirits may be down with gas demand this Christmas season. The association told those attending its year-end review conference in Washington, D.C. to expect 5% growth in consumption in 1999, led by a 13% increase in the residential sector and a 6.8% jump in the commercial sector. This rosy glow, however, would be fueled by normal weather, something that's been in short supply over the past year. Given above normal winter temperatures next year (10% fewer heating degree days) and several other negative factors such as $10/bbl oil prices, AGA expects an 0.4% drop in gas demand.

The 10-year average of gas demand growth is 2.8% per year, but demand this year is down 2% from last, which in turn fell short from the previous year by about 0.1%. The association sees the return of normal weather putting demand back in line with the growth trend of the early- and mid-1990s. It's base-case forecast of 23.23 quadrillion Btus (roughly 23.22 Tcf) is only 3% more than 22.54 quads of gas consumed in 1997, AGA noted.

AGA said the electric utility sector is expected to cool down somewhat next year from the 11% growth experienced this year and soak up 3.50 quads of gas, or 3.5% more than in 1998. The industrial sector is expected to show a modest 1.1% growth to 8.94 quads because of the slow-down in the economy. But in the base case the residential and commercial sectors are expected to grow to 5.32 and 3.44 quads, respectively, from an estimated 4.70 and 3.22 quads in 1998.

Observers may want to consider, however, AGA's 1998 base case forecast released last December was off by 1.18 Tcf, or about 5.3% higher than actual gas demand. The association forecast 23.3 quads of gas would be consumed this year. And its mid-year base case forecast, which called for 22.58 quads of gas demand in 1998, overestimated consumption by roughly 460 Bcf (0.46 quads). The warm weather this year is expected to cause a 2% drop in total consumption, which will end the year near 22.12 quads. Temperatures during the fourth quarter are expected to be 9.1% warmer than normal.

Rocco Canonica

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