It will take more than a single event to lift keep natural gas prices sustainably higher, energy analysts predicted last week.

The quick transition this year to the cooling season from the heating season likely will provide only temporary support for higher prices because of the “relatively robust” inventory builds, according to Credit Suisse analysts.

This year’s gas prices, said analysts, still should average $4.75/Mcf, which is the same price forecast Credit Suisse issued in April.

“Sure, record heat and hurricane disruptions could prevent the industry from rebuilding storage to adequate levels this season,” said Credit Suisse’s Teri Viswanath. “However, given current high inventory levels, the industry is on track to build 3.8 Tcf by the end of the season by simply injecting at the 10-year average rate.”

Where gas prices trend this summer is determined mostly by the market’s expectation of whether the industry rebuilds an adequate level of inventories ahead of the winter heating season, the analyst noted. The “chief impediments” in a low-demand summer include heavier-than-expected demand from gas-fired generation and supply disruptions caused by hurricane activity in the Gulf of Mexico.

“This year the industry will likely encounter both sweltering temperatures and a half-dozen major hurricanes on the way to rebuilding storage,” said Viswanath. “Market participants have certainly paid attention to these ominous seasonal forecasts and as a result have extracted a premium for the summer strip.”

The “obvious cure to high natural gas prices (in a well supplied market) is high gas prices. Natural gas prices have now risen to a point where coal generation is recapturing market share (a trend we expect to intensify during the upcoming shoulder months). Reduced coal-to-gas electric power switching will likely keep balances relatively loose during the shoulder period.”

The three “key factors” that limited gas storage injections last year were coal-to-gas switching, producer shut-ins and early heating demand, Viswanath noted. Those factors “will not be present this year. The possibility of a strong finish to the injection season will likely dampen the opportunities for an extended rally.”

The U.S. gas-directed rig count may turn lower, but “the resurgent trend in drilling from last year’s low contributes to our outlook for production growth in 2010,” said the Credit Suisse analyst (see related story). “Given the strong first quarter trend, we now expect that domestic production could increase by as much as 1 Bcf/d in 2010.”

A trio of Barclays Capital analysts said Tuesday a “single event” might push natural gas prices to the $8/Mcf level in 2011, but several events in combination “could certainly rally prices.”

“Any event would need to fight the momentum of supply growing faster than core demand that we believe underlies the current market,” said Jim Crandell, Biliana Pehlivanova and Michael Zenker.

It’s unlikely that one thing would lift prices to the $8 level, and “make no mistake: we remain bearish on 2011 gas prices,” the trio noted. However, they examined the bulls’ case and recognized that other factors — or more likely a combination of factors — might transform the market into a bullish trajectory.

Getting to an $8 market would require roughly a 4 Bcf/d drop in supply or surge in demand, which is equal to around 7% of 2009 U.S. output, said Crandell and his colleagues.

“The most likely single event that could push the market to $8 is (no surprise) a severe, production-disrupting hurricane. But it would have to be more severe than the Rita/Katrina one-two punch” experienced in 2005, they said. “A drought in the capital markets, curve-flatting event or other external driver that pushed the rig count significantly lower could also gird prices to $8. Other drivers look to us to be too small on their own.”

Barclays Capital’s outlook for 2011 domestic gas prices remains at $4.10/Mcf, which suggests that prices will decline into 2011.

Gas “is always fated to have wide price swings,” analysts said. “A natural gas price forecaster that has not been humbled is, by definition, a rookie.” The team based its base outlook for 2011 on projections that the market would be sufficiently supplied to require gas to displace coal at more than 3 Bcf/d (see NGI, March 1).

Single events considered “too small” by themselves to push gas to an $8 level include $100/bbl oil; a cold 2010-2011 winter; hot summer weather/power demand boost; new drilling restrictions; and a lack of liquefied natural gas imports.

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