Predicting

The rumblings of a nasty gas market reversal can be heard loud and clear, said Lehman Brothers analyst Thomas Driscoll in a research note, predicting the current price collapse would continue into the summer.

Regardless of the recent major declines in gas prices, the Energy Information Administration (EIA) remains firmly in the natural gas bulls’ camp, predicting that spot Henry Hub gas prices, which averaged $9.00/Mcf in 2005 will average $11.25/Mcf ($10.92/MMBtu) in the first quarter of 2006 and $9.80/Mcf for the year. Last month, EIA’s forecast was $11.48 for the first quarter and $9.30 for the year. Henry Hub prices currently are about $8.60/MMBtu ($8.35/Mcf).

The Energy Information Administration (EIA) is clearly in the natural gas bulls’ camp, predicting that spot Henry Hub gas prices, which averaged $9.00/Mcf in 2005 will average $11.25/Mcf ($10.92/MMBtu) in the first quarter of 2006 and $9.80/Mcf for the year. Last month, EIA’s forecast was $11.48 for the first quarter and $9.30 for the year. Henry Hub prices currently are about $8.60/MMBtu ($8.35/Mcf).

While some industry experts tend to use natural gas futures prices as an aid in predicting realized spot prices at the Henry Hub, a new study from the Energy Information Administration (EIA) found that out month futures prices are “relatively poor predictors” of the Henry Hub spot price that is eventually realized when the contract settles, and even the final futures price for a given contract often does not match the realized average spot cash price.

With projected Gulf of Mexico shut-ins of at least 2 Bcf/d running through December and the Weather Service predicting a slightly colder than normal winter for the Lower 48 states, the Energy Information Administration (EIA) estimates residential heating customers will pay 48%, or $350, more this winter for natural gas as wholesale prices average $11.40/Mcf (under normal winter weather) October through March.

With projected Gulf of Mexico shut-ins of at least 2 Bcf/d running through December and the Weather Service predicting a slightly colder than normal winter, the Energy Information Administration (EIA) estimates residential heating customers will pay 48%, or $350, more this winter for natural gas as wholesale prices average $11.40/Mcf (under normal winter weather) October through March.

Consulting firm Global Insight has exceeded many other forecasters in predicting that Henry Hub gas prices will average more than $12/MMBtu this winter (November-March) as a consequence of massive cumulative supply losses totaling 8% of U.S. gas supply during the fourth quarter due to damage from hurricanes Katrina and Rita.

NGI sources generally were correct Thursday in predicting a moderate cash rally for Friday, but not entirely accurate. Prices fell at virtually all Northeast citygates Friday as a cold front took regional temperatures lower for the weekend, and at scattered points elsewhere. Otherwise quotes ranged from flat to as much as 20 cents higher.

While no one in Canada is predicting a return to rapid natural gas production and export growth rates of the 1980s and ’90s, entrepreneurial factions of the industry refuse to accept the idea it has run out of new supply sources.