Joining the growing list of concerned analysts, UBS Warburg’s Ronald Barone said last week he expects to lower his natural gas price forecasts again this week and cut earnings projections for multiple energy companies in light of lower prices and the downturn in the economy.

Supply and demand fundamental should put continued downward pressure on spot prices, he noted. The storage picture in particular is “not looking good,” he said. According to the American Gas Association, 91 Bcf was injected into storage for the week ending Sept. 21. This injection compares to 90 Bcf in the prior week, 77 Bcf last year and 79 Bcf the year before. The sizeable injection expanded the year-over-year surplus by 14 Bcf to 446 Bcf from the prior week.

“Looking ahead, given the continued lackluster temperature/demand outlook, highly attractive arbitrage (and the following four year-ago comparisons of 78, 62, 29 and 71 Bcf), we continue to expect incremental growth in the surplus prior to the start of the heating season,” said Barone in UBS’ Research Note. “Realistically, unless Mother Nature delivers a substantially cooler than normal fall, we would expect supplies to approach (and potentially surpass) the 3.2 Tcf mark by Nov. 1, possibly even reaching the 3,294 Tcf stated capacity.”

Gas in the ground currently stands at 2,848 Bcf versus 2,402 Bcf last year. Barone said that going forward his calculations suggest weekly injection requirements of 27 Bcf to reach the 3 Tcf level by Nov. 1 and 62 Bcf to reach 3.2 Tcf.

The analyst also pointed to the steady decline of natural gas futures prices, made evident as the October contract closed at $1.83/MMBtu, marking the lowest prompt contract expiration in 30 months.

As gas prices continue to fall off, Barone noted that U.S. drilling rates are also declining at a “fairly rapid” pace. He said the total U.S. rig count for the week ending Sept. 21 fell 16 rigs to 1,186, which compares to 998 last year. The Canadian rig count also showed losses, dropping 13 rigs to 344 for the week ending Sept. 21.

©Copyright 2001 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.