Producers addled by low prices could take some comfort from atasty lunch served up with a cheerful prediction. Brad Karp,president of Duke Energy Trading and Marketing, told a producerluncheon in Houston last week his company is pretty bullish on gasprices long term.

“The price outlook for natural gas year 2000 forward is quiterobust. The five-year strip price coming out of the year 2000 is$2.40 plus or minus, which is at the high end of the range forwhere annual strip prices in natural gas have been trading..

“It’s clear the marketplace is concerned about the ability ofthe producing community to keep up with the demand growth. Thecounterbalance to that for the rest of ’99 is inventory levels. Wehave some 300 Bcf more in inventory than we did at this time a yearago. Those are the two forces that are kind of competing in themarketplace right now, and our hunch is that the inventory concernsare not likely to weigh heavier on the market than the concernsabout forward deliverability, at least until you get out into thethird quarter and get a better feel for how injections intoinventory are going to perform once you get into the peak summerpower generation period where there’s likely to be pretty healthydemand for natural gas.”

Duke Energy Trading and Marketing, owned 60% by Duke Energy and40% by Mobil, expects “somewhat stable prices for the next three orfour months, and then you’re likely to get an inflection point inthe third quarter where either the marketplace decides that year2000 forward is the right place for prices to be or the ingenuityand motivation of the producing community is going to keep enoughsupply available that $2.00 is a more realistic price going forwardfor natural gas than $2.40. Either way it looks a whole lot betterthan $1.70.”

Karp’s company markets all of Mobil’s North American gasproduction, about 1.5 Bcf/d. He said it was premature fordiscussions of whether Duke Energy Trading and Marketing could endup marketing Exxon’s gas production once the Exxon-Mobil merger iscompleted. “Hopefully by the end of the second quarter here we’llbe able to answer that question with something substantive.” Karpmade his remarks at the Independent Petroleum Association ofAmerica’s (IPAA) monthly Houston luncheon.

Joe Fisher, Houston

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