In its weekly outlook on gas storage levels, Salomon SmithBarney (SSB) raised its forecast of expected storage levels at theend of the winter heating season by 117 Bcf from the previous week.The firm, which has grown increasingly bearish because of theclimbing storage surplus, now expects there to be 1,423 Bcf ofworking gas in storage on April 3, which would be 522 Bcf more thanthe four-year average on that date and 364 Bcf more than the sametime last year. Working gas levels in storage as of Feb. 12 were at1,887 Bcf, which is 462 Bcf more than last year on the same date,according to the American Gas Association (AGA).

The increase in SSB’s surplus forecast reflectslower-than-expected storage withdrawals for the week ending Feb. 12and 25% warmer than normal temperatures expected for the weekending Feb. 20. AGA said a measly 59 Bcf of gas was withdrawn forthe week ending Feb. 12 and even reported a 5 Bcf injection in theproducing region. SSB was projecting 91 Bcf of gas to be withdrawnthat week based on a heating degree day expectations combined withforecasts of non-heating related demand due to low gas prices. Theinvestment firm said, however, there still is a strong correlationbetween heating degree days and storage withdrawals. Despite somerecent surprises in withdrawal rates – both higher and lower thanexpected – this heating season has been no exception to that rule,with coefficients of determination (R2) this winter near 95%through Feb. 13.

SSB is expecting withdrawals of 82 Bcf during the week endingFeb. 19 and 1,805 Bcf of working gas to remain in storage. The AGAwill report on that week’s activity this afternoon.

SSB is expecting Henry Hub prices to average only $2/MMBtu thisyear, but it believes prices will rebound to $2.35 in 2000 based ondemand growth projections and the return of normal wintertemperatures.

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