June 9, 2004
ASSOCIATED PRESS

WASHINGTON -- Although there is plenty of natural gas in storage, growing demand this summer will keep prices high, industry leaders predicted Tuesday.

The Natural Gas Supply Association said it "expects continuing upward pressure on prices this cooling season, primarily due to projected warmer-than-normal weather, a strengthening economy and relatively flat production."

Joseph Blount, the trade group's chairman, warned a number of "wild cards" could send prices higher. Among them: a hotter summer than expected, disruption of supplies because of hurricanes or pipeline problems.

One advantage this year, Blount said, is that the amount of natural gas in inventory is at about the five-year average, compared with a year ago, when inventories were dangerously low.

According to the Energy Department, nearly 1.6 trillion cubic feet of gas was in storage at the end of May, about the five-year average but nearly a third more than was in storage at the same time a year ago.

Blount said he was confident that the industry would be able to continue increasing stocks through the summer so that storage inventories will approach the 3.2 trillion cubic feet needed to begin the winter heating season.

But prices are expected to stay above $6 a thousand cubic feet. The cost of gas for delivery in July was $6.24 a thousand cubic feet at midday Tuesday on the New York Mercantile Exchange. The spot price on Monday was slightly lower at $6.11

The Natural Gas Supply Association, which represents gas producers, said there has been a 26 percent increase in the number of rigs -- more than 1,000 -- drilling for natural gas this spring, but that production has been flat because of declines in the amount of gas coming out of older wells.

"We are working harder and harder just to keep production levels constant," said Blount, who is president of Houston-based Unocal Midstream and Trade.

He said, according to a study commissioned by Natural Gas Supply Association, overall demand for natural gas will increase as much as 3 percent to 51 billion cubic feet a day this summer, with much of the increase as a result of demand by the electric power industry.

That, along with flat production will keep prices high, he said.

Separately, a report released Tuesday by the International Energy Agency concluded that while supplies of North American natural gas may be tight, there is enough gas to meet demand and the possibility of supply disruptions are slight.

But, said the report, that current high price of natural gas -- double what it was several years ago -- reflects the tight balance between supply and demand, something that is unlikely to ease anytime soon.

http://www.floridatoday.com/!NEWSROOM/moneystoryB0609GAS.htm