<i>Editor's note: <\/i>Energy Circuit<i> takes no responsibility for the accuracy of this forecast.<\/i> Natural gas and oil prices continue to retreat from their highs of the last few weeks, even as the heating season kicks in. Cold weather has increased the demand for natural gas, and storage will start being drawn down this week or next for the first time since last March. With storage levels well above average, gas supplies should be ample this winter. The outlook for next year is not so rosy, however. Separate reports released this week by Lehman Brothers and Raymond James corroborate what readers of this column already know: North American natural gas production continues to decline despite an upsurge in drilling activity. Raymond James analysts surveyed major U.S. producers and found third-quarter production dropped 3.3 percent year-on-year and 1.4 percent from the second quarter. Lehman Brothers? findings concluded that U.S. gas consumption will need to fall 1.9 percent in 2004 for demand to be in balance with dwindling supply. According to one analyst, ?price rationing? is the only option for bringing the gas market into balance. In other words, prices will continue to rise until consumption declines. My model reaches the same conclusion. If the present production and consumption trends continue, large quantities of natural gas from storage will be needed to get through next year. I expect we will enter next winter with much less in storage, while gas will be ?rationed? to those who can afford higher prices. If the presidential candidates mentioned this unpleasant outlook, I must have missed it.