Forecast

With the expectation that the injection season will end with gas storage at 200 Bcf above the five-year average, Lehman Brothers cut its price forecast for the rest of the year to $7/MMBtu from $7.75/MMBtu “to reflect the turmoil that the oversupply may cause in the market in the next several months.”

Heat levels forecast for Wednesday are rising by sufficient amounts in enough areas to produce rising prices at most points Tuesday. July futures continued to buck the trend by dropping another 6.3 cents Tuesday.

What was forecast to be a week of above-normal temperatures throughout most of the U.S. began Monday with warming trends in some areas as advertised, but not enough heat to keep prices from continuing to fall at most points. Friday’s 21.8-cent slide by July futures also had bearish implications for Monday’s cash market.

Citing a forecast of 90-degree weather in central Florida, Florida Gas Transmission issued an Overage Alert Day Tuesday for market-area customers. The tolerance for negative daily imbalances was set at 25%. FGT said it would not interrupt previously scheduled market-area ITS-1 service for Tuesday’s gas day.

Better than expected gas prices during the first quarter have prompted Canaccord Adams to boost its 2007 Henry Hub price forecast to $7.50/MMBtu from $7.00/MMBtu, the firm said Friday. Its 2008 assumption of $8.25/MMBtu remains unchanged.

As a couple of sources had predicted the day before, the cash market remained close to unchanged Thursday in most cases. Freezing lows forecast for Friday morning in much of the East, even into the Deep South, were augmented by Wednesday’s screen rebound in being responsible for modest gains at a majority of points.

The headline on The Weather Channel’s (TWC) next-day forecast posted Thursday afternoon said it all: “Bitter cold for much of the country.” As could be expected, prices continued to rise at most points Thursday, with only a few flat to nearly 20 cents lower Northeast citygates preventing all-points gains.

Kern River noted that temperatures continue to be forecast as much colder than normal in all of its supply and market areas for the Jan. 11-15 period. “In the event physical supply is impacted due to the cold weather and receipt point operators are unable to delivery their scheduled quantity, Kern River will likely request that the receipt point operator reduce their confirmation to match their physical deliveries to Kern River,” the pipeline said Wednesday. “If a shipper’s nominations are reduced by a receipt point operator, that shipper should be prepared to find alternate supply. In the event a shipper is unable to find alternate supply, that shipper’s affected market will be expected to take physical delivery equal to their scheduled quantity.”

Citing a forecast of much colder temperatures in the Pacific Northwest in the next several weeks, Northwest said it will “ensure the preservation of its Jackson Prairie [storage] balancing account” by declaring a Stage II (8% tolerance) Overrun Entitlement for Receiving Parties on the Wenatchee Lateral and a Stage III Overrun Entitlement (13% tolerance ) for all other Receiving Parties located north of the Kemmerer (WY) Compressor Station. The entitlements become effective Tuesday until further notice. Northwest said it will continue to cut alternate gas as necessary to preserve primary firm service or to move balancing gas from Questar’s Clay Basin storage facility to Jackson Prairie where appropriate, and it encouraged customers “to secure adequate supplies from Canadian supply sources, particularly Sumas, during cold periods in order to avoid entitlements and OFOs.”