Soothsayers are having a tough time coming up with a solid price forecast for this winter and next year because of the uncertainty over a potential war with Iraq and the mixed views about winter weather and gas supply.

“In the immediate near term, I think prices are a little overvalued, and I think there is room…to fall back,” said Kristin Domanski, manager of Power & Gas Analytics for Energy Security Analysis Inc. Speaking at Platts Day of the Trader conference in New Orleans, she pointed out that as of the last Energy Information Administration storage report, storage was at 10-year record highs at 96% full. “The winter does not look like it is going to be particularly bullish.”

Moving forward into the winter heating season, Domanski said the one “underlying caveat is the crude factor. With the crude rally in early 2002, and then again, we had the spike up recently in August, there was a real sympathetic movement between crude funds and natural gas funds,” she said. If the United States invades Iraq, Domanski believes the underlying crude volatility could have a rippling effect on gas prices.

In contrast, Art Gelber, president of Gelber & Associates, said he thinks the market “has already discounted a war in Iraq.” In addition, he believes the market has already discounted “more or less the type of winter we think we are going to have.” As for his customers, Gelber said they are still trying to stay long for the near term. “We are not looking to be aggressive buyers for the forward curve until sometime in 2003,” he noted.

“The natural gas market has been in an uptrend since 1992,” said Gelber. “However, our thoughts for the coming winter are that prices will peak out between $4.60- $4.80 and that will probably happen before Christmas time, but then it will move back down towards about two bucks.” He added that the market will then test the uptrend one more time, hold, and then continue to go back up to where it is roughly right now.

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