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Analysts See Megawatts Multiplying

January 17, 2000
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Analysts See Megawatts Multiplying

Traders sweating out the warm winter and wondering how they're going to get rid of surplus storage can take heart from a new analysts report that sees 27,000 MW of natural gas-fired power generation capacity being added in the next 12 months.

"This should further translate into an increase in natural gas consumption of 1.5 Bcf/d potentially, during those hot summer days when gas-fired peaking units are running full out for 24 hours a day, seven days a week in an effort to keep pace with air conditioning demand," says Raymond James Energy of St. Petersburg, FL.

The group notes that while more conservative estimates show an annual electric capacity growth rate of 1.1%, Raymond James Energy is predicting a 2% growth rate. This is based on the severe drop in power capacity additions over the last 15 years, at the same time demand has increased to the point where "we are well below what we consider to be the comfort zone for electric capacity margins."

What all this means is that despite the warm winter "the underlying bullish fundamentals for natural gas, excluding weather, remain intact with evidence of tightening supply and demand becoming more and more evident." Raymond James Energy says it is maintaining a composite annual price forecast of $2.80/MMBtu for 2000.

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