Guernsey Projects Low Natural Gas Levels to Affect Summer Prices

02.11.2003

OKLAHOMA CITY – In a report issued today, economists at C. H. Guernsey & Company, Donald Murry, Ph.D. and Zhen Zhu, Ph.D., have projected low levels of stored natural gas to influence prices throughout the summer.

The GUERNSEY economists are estimating the withdrawals for the week ending Feb. 7, which the Energy Information Administration is scheduled to release on Thursday, are in the range of 152 to 170 billion cubic feet (Bcf). According to GUERNSEY's report, based on the actual and forecasted weather, it predicts a large withdrawal of 213 Bcf for the current week ending Feb. 14. The five-year average for the same period is a withdrawal of only 95 Bcf.

The report's econometric model-based predictions include an estimated level of gas in storage of 657 Bcf at the end of March, which is below industry analysts' minimum target of 1,000 Bcf.

In explaining the storage level's influence on summer prices, the report states, “With normal summer weather, we estimate by July the storage levels will be approximately 760 Bcf behind the five-year average. This provides a storage deficit influencing gas prices throughout the remaining four months of the injection season.”

The report also presents a model estimating summer physical market prices and compares those prices to the current futures prices on the New York Mercantile Exchange (NYMEX). The authors conclude, “…even at the current high levels, we believe the physical gas prices at the Henry Hub are likely to exceed the NYMEX price levels for early summer months.”

The report, “The Impact of Natural Gas Storage Levels and Withdrawals on Forecasted Summer 2003 Natural Gas Prices,” is available at www.chguernsey-econ.com.

C. H. Guernsey & Company, celebrating its 75th year of business, offers the highest quality engineering, architectural and consulting solutions to clients in the United States and abroad. GUERNSEY has its headquarters in Oklahoma City with offices in Colorado, Florida, Georgia, Hawaii, Illinois and Texas.

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