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

“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 Daily GPI, Feb. 24).

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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