R.W. Beck’s energy market consultants on Wednesday revised their 2004 natural gas price at Henry Hub upward 50 cents, or 10%, to $5.86/MMBtu because, they said, world events have driven up oil prices and kept an already tight gas market in over drive.

Beck’s updated forecast is “almost entirely attributable to the unexpected increase in oil prices in the second quarter,” said Catherine Elder, leader of Beck’s Natural Gas and Fuels Practice in Sacramento. “All market drivers are behaving as we expected, except the oil price of $40/bbl. Natural gas injections, demand and production are right where we projected they would be,” she said.

“Despite perceived market tightness, storage injections are slightly ahead of schedule — even after adjusting for weather,” the consultants said. “The relatively high weather-adjusted injections suggest that supply is actually a bit looser than many claim.” They noted that “persistent” higher prices “have finally pulled mid-July’s gas rig count close to 1,050 — a level last seen in 2001, at the end of the last price spike.”

As new gas supply comes on line “later this year and into next,” expect prices to fall. “Our long-term view keeps prices above $4/MMBtu as we expect to need 16,000-17,000 well completions per year, even adding new liquefied natural gas every year. Higher than expected demand and nervous oil markets are the primary near-term uncertainties.”

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