<i>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. On a trial basis, </i>California Energy Circuit <i>will publish national gas storage data reported by the U.S. Energy Information Administration. We will also include the estimate of the author, Dr. Rich Ferguson, Center for Energy Efficiency and Renewable Technologies research director, of the following week?s storage level. This publication takes no responsibility for the estimates? accuracy.</i> <b>Comments:</b> Seasonal temperatures around the country resulted in another large addition to storage for the week ending 5/28. Storage levels increased 87 bcf in line with my forecast and are about average for this time of year. Nevertheless, gas prices remained around $6.50/MMBtu this week, spiking briefly with oil prices in response to turmoil in Saudi Arabia. There seems to be plenty of gas going into storage, so why worry? As Bill Clinton might tell us, it?s the supply, stupid. Since the beginning of the year, supply has not been keeping up with demand when gas going into storage and gas used for heating and cooling are accounted for. During that time, U.S. daily gas supplies relative to temperature-independent demand have decreased by about 6 bcf, about 10% of total average demand. Either gas supplies are decreasing, or demand is increasing, or some combination of both. If this trend continues until the beginning of the heating season in November and the weather is like last summer?s, storage levels will be insufficient to get us through next winter. In my opinion, the market figured out that the current seemingly plentiful supply situation may not last through the summer. Buyers have bid prices up in the process of ensuring that they have enough gas for their own needs next winter. I see little possibility of gas prices dropping significantly this summer. If present trends in supply and demand continue, there is a real possibility of actual shortages and rationing next winter. <table cellspacing= 1 cellpadding = 1 border=1><tr align=’center’><th colspan=’5′><b>U.S. Natural Gas Storage</b> (in billion cubic feet)</th></tr> <tr align=’center’><td>Date (2004)</td><td>Stocks</td><td>Change from prior week</td><td>Forecast change</td><td>Prior 5-year average stocks*</td></tr> <tr align=’center’><td>May 7</td><td>1,303</td><td>+76</td><td>+70</td><td>1,340</td></tr><tr align=’center’><td>May 14</td><td>1,388</td><td>+85</td><td>+101</td><td>1,418</td></tr><tr align=’center’><td>May 21</td><td>1,477</td><td>+89</td><td>+89</td><td>1,493</td></tr><tr align=’center’><td>May 28</td><td>1,564</td><td>+87</td><td>+86</td><td>1,590</td></tr><tr align=’center’><td>June 4</td><td></td><td></td><td>+90</td><td>1,680</td></tr></table> * Historical averages may differ slightly from those reported by USEIA.