For the second time in as many months analysts at Raymond James & Associates Inc. cut their 2012 natural gas price forecast, this time by 12.5% to $3.50/Mcf from $4.00/Mcf. “…[Y]ou all know the story — an unrelenting supply glut…” they said in a note Monday.

The outlook for stronger natural gas prices is “worse than the job prospects of Jon Corzine,” the fallen head of bankrupt MF Global Holdings Ltd. (see Daily GPI, Nov. 2), wrote J. Marshall Adkins and his team.

“Looking ahead to next year, we believe that additional year/year gas supply growth will continue at a similar 4-plus Bcf/d pace as a result of exceptional associated gas production levels originating from the recent emphasis on liquids plays,” Raymond James said.

The previous cut to the forecast occurred in October and was from $4.25/Mcf to $4.00/Mcf (see Daily GPI, Oct. 17).

Canadian imports should taper by about 1 Bcf/d due to the lower prices, they said. Another 0.4 Bcf/d of supply erosion could come from lower liquefied natural gas imports and Mexican exports, they said.

“On the demand side, the extreme weather of 2011 will make for a very tough comparison next year,” the analysts wrote. “As always, we don’t claim to be meteorologists and thus model ‘normal’ weather, on par with the 30-year average. Gas demand — particularly its industrial component — will have a hard time growing under a quasi-recession economic scenario.

“Lower gas prices should prompt an increased amount of coal-to-gas switching, but much of the low-hanging fruit has already been picked.”

Currently the team is modeling 4.59 Tcf of gas in storage at the end of the upcoming summer, “but as we estimate there to only be about 4 Tcf of total storage capacity, this means that gas prices will need to be low enough to encourage production shut-ins or more coal-to-gas switching. Either way, it doesn’t bode well for gas prices.”

The team pointed out that while its latest 2012 price forecast might be among the most dour out there, it still is only about 25 cents above the New York Mercantile Exchange strip.

“If our assumptions prove to be correct, look for natural gas prices to reach sub-$3/Mcf levels next summer,” they said.

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