Ferguson’s Forecast

Storage is the main price driver for natural gas. Storage also provides the most current and accurate snapshot of the natural gas market's supply and demand. The following data are from the U.S. Energy Information Administration. Energy Circuit takes no responsibility for the accuracy of this forecast. Gas in storage jumped 99 Bcf in the week ending September 10, considerably above forecast. Hurricane Ivan cruised through the major oil- and gas-producing areas in the Gulf of Mexico and caused several hundred platforms to be evacuated. The U.S. Minerals Management Service reported that as of Thursday, 40 percent of the Gulf gas production had been ?shut in,? reducing supplies by 18 Bcf. MMS also reported that a major gas line in the Gulf had ruptured and was on fire. My guess is that storage will be down by 25 Bcf this week to account for Ivan?s wrath. Spot prices jumped 10 percent on Tuesday in anticipation of Ivan, and prices for gas to be delivered in October also moved higher, closing yesterday at $4.81/MMcf. As you can see from the storage numbers below, a loss of even 25 Bcf is less than 1 percent of the amount in storage, which remains well above the five-year average. The longer-term price movements are due primarily to market psychology rather than significant changes in supply and demand. Now that Ivan has left the Gulf, we can expect downward price pressure to resume?until the next hurricane. U.S. Natural Gas Storage (in billion cubic feet) Date (2004) Stocks Change from prior week Forecast change Prior 5-year average stocks* Aug. 20 2,614 +84 +93 2,456 Aug. 27 2,695 +81 +86 2,518 Sept. 3 2,775 +80 +72 2,603 Sept. 10 2,874 +99 +80 2,682 Sept. 17 +67? 2,764 * Historical averages may differ slightly from those reported by USEIA.

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Ferguson’s Forecast

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