The gas bulls are firmly entrenched at the St. Petersburg, FLoffices of Raymond James & Associates. The group put out areport this week projecting either the loss of 5 Bcf/d of gasdemand this winter due to soaring gas prices or an “impossible”negative balance of working gas in storage at the end of the winterheating season, given normal temperatures this winter.

“In our normal winter case, year-to-year winter demand shouldincrease by a whopping 9.3 Bcf/d, or about 1,400 Bcf for the entirefive month winter heating season. The key driver here is thatexceptionally warm winters for the past four winters have maskedthe strong economic growth that has occurred in the U.S. over thepast five years.”

Raymond James analysts note that temperatures so far this winterhave been 17% below normal and the National Weather Service ispredicting more of the same for the next couple weeks. RaymondJames expects a 122 Bcf withdrawal to be reported by the AmericanGas Association this Wednesday for the previous week’s storageactivity despite the holiday.

“Even if the rest of the winter is 14% warmer than normal, weare now likely to end up with less than 900 Bcf in storage at theend of the winter. If the rest of the winter is normal, thetheoretical storage deficit should grow to a negative 293 Bcf.”

Raymond James admits it’s impossible to reach such a scenario.”History has shown that not only is this highly unlikely, but thegas distribution system begins to run into significant problemswhen gas storage levels fall below 600 Bcf in storage.” The lasttime that happened was the 1995-96 heating season when gas priceswent through the roof, and Raymond James predicts that will occuragain this winter. “In other words, gas prices must continue torise sufficiently to drive as much as 5 Bcf/d of demand out of U.S.gas markets. What is that price? We have no idea but it is safe toassume that price will be somewhere higher than $5 and likelysomewhere less than $50/Mcf.”

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