Consultants

Producers continue to report record high cash flow on strong oil and natural gas prices, but most of the free cash isn’t going toward new exploration projects, which is a troubling sign, said experts in Houston this week at the Deloitte 2004 Oil & Gas Conference.

Consultants at Wakefield, MA-based Energy Security Analysis Inc. (ESAI) said Tuesday that continuing weakness in the crude oil market should put downward pressure on natural gas prices, but fears of a cold snap and recent winter market history are expected to provide strong support at around $6.50/MMBtu.

Consultants at Wakefield, MA-based Energy Security Analysis Inc. (ESAI) said Tuesday that continuing weakness in the crude oil market should put downward pressure on natural gas prices, but fears of a cold snap and recent winter market history are expected to provide strong support at around $6.50/MMBtu.

Energy consumers are in for a tough winter heating season with sharply higher prices for all energy commodities compared to last winter, the Energy Information Administration (EIA) said last week. Two forecasts released by EIA on Wednesday — a day when heating oil reached a record high, crude oil remained over $52/bbl and natural gas was still more than $7/MMBtu — predict that higher prices will remain the norm over the short term.

IHS Energy, which specializes in analyzing energy exploration and production (E&P) data around the world, has acquired Cambridge Energy Research Associates (CERA), whose analysis covers energy markets, geopolitics, structure and strategy. The partnership, said the IHS Group subsidiary, will build on the companies’ joint resources to expand their database and operations support. No financial details were disclosed.

Consultants at Massachusetts-based Energy Security Analysis Inc. (ESAI) said last week that they believe many industry analysts and the large number of new financial players in the gas futures market are underestimating the impact of rising liquefied natural gas (LNG) imports and could be in for quite a surprise near the end of the storage injection season.

The growing presence of hedge funds in the gas and oil markets has been blamed for increasing volatility and driving up prices, but little is known about these private investment groups and their market influence. Two consulting firms, UtiliPoint International Inc. and Global Change Associates (GCA), have announced plans to tackle this mystery in a new study, “Hedge Funds Enter the Energy Trading Space.”

Gas prices are likely to average $6.10 at the Henry Hub this year and catapult over the $7 mark in 2005, according to consultants at Energy and Environmental Analysis Inc. in Arlington, VA. EEA said in a report Wednesday that despite adequate storage injections and average working gas levels, it expects prices for the rest of the injection season to average $6.45 at the Henry Hub.

While many industry consultants and analysts are predicting that gas prices will escalate to more than $7/MMBtu as soon as this winter and will hold at that level through next year (see Daily GPI, July 22), Massachusetts-based Energy Security Analysis Inc. (ESAI) believes the market is underestimating the substantial impact from increasing imports of liquefied natural gas (LNG) and will be in for quite a surprise near the end of the storage injection season.