Comments to Natural Gas Week's Quarterly Price Forecast Scoreboard
We submitted our current composite wellhead gas price forecasts to the Natural Gas Week Price Forecast Scoreboard. The Scoreboard for Q3 will be published in the July 26th issue:
Q3 2010: $4.80 per MMBtu
Q4 2010: $4.30 per MMBtu
FY 2010: $4.60 per MMBtu
FY 2011: $4.50 per MMBtu
Commentary: Gas prices for Aug/Sep are forecast to move to $5.00-5.50 per MMBtu based on expected tropical storm and hurricane activity in the Gulf of Mexico. However, with onshore production continuing to grow, the impact of storms in the Gulf of Mexico will have less impact than in 2005 and 2008. Furthermore, inventory accumulation so far has bee in line with expectations and peak inventory in working storage is on track to peak at 3.8 TCF. We note that EIA's final inventory number for the end of April was 2.01 TCF and was almost 100 BCF higher than April 2009 -- itself a record high for the end of April. Further, demand in the electric power generation sector during March/April was below expectations and March was almost 10% below year-earlier volumes. Temperatures in the Gulf Coast were moderate during the first half of July and power generation demand is likely to be below bullish expectations for the peak demand months of Jul/Aug.
As we move out of hurricane season and inventories continue to build to a new record high, we see the bullish camp pulling up stumps and the bearish camp taking control of price trends during late Sep through early Dec. Even if winter 2010-11 is as cold as 2009-10, inventories will again most likely become a major bearish consideration for Q1 2011.
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