Natural gas price forecasts are well under 2008 level
Analysts see prices under $5 per Btu; average was $7.84 in ‘08
By Tom Stundza -- Purchasing, 4/8/2009 3:55:00 PM
Natural gas prices will average $4.70 per million British thermal units in 2009, down 18% from earlier forecasts of $5.75 as U.S. inventories have surged to the second-highest level ever. That’s the outlook from UBS Securities in New York. In 2010, prices will average $7 per million Btu from $7.75 in the previous estimate. In 2008, natural gas at the wellhead averaged $7.84 per Btu.
“We are lowering our forecast as the supply-demand balance remains oversupplied,” UBS says. “Lower than previously expected prices appear to be required to rebalance markets in 2009.” However, these projections remain higher than the U.S. Energy Department’s forecast of a spot price average of $4.54 per Btu in 2009 and $5.71 per Btu in 2010. “Despite some heating demand that has persisted, overall demand and prices in the largest gas-consuming areas of the country have showed weakness,” the Energy Department says.
The government agency expects the nation's natural-gas consumption to decline by 1.3% in 2009. Reason: “There is plenty of gas available in the U.S. right now, as well as worldwide,” the president of energy-consulting firm Perry Management in Midland, Texas, tells MarketWatch.com "Supplies are plentiful and storage is high so there is little, if any, upside pressure on gas prices now."
Never mind the fact that natural-gas consumption normally climbs during the summer as cooling demand starts to kick in. "Natural-gas storage levels are exiting the heating season above the five-year average, while consumption is constrained by negative growth fundamentals in the broad market and industrial sector," Dan Payne, an analyst at Paradigm Capital, writes in a recent note to clients.
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