Natural gas prices up for summer


Thursday, April 3rd 2003, 12:00 am
By: News On 6



OKLAHOMA CITY (AP) _ The price of natural gas will remain high this summer as supply is restored in preparation for winter, industry experts said.

Gas prices usually drop in the spring and summer as demand falls. But because the nation's natural-gas inventories finished the winter at a record low, demand is expected to remain high throughout the summer as companies work to replenish the storage.


Price estimates for this summer vary widely, but experts predict they will not return soon to the industry-crushing levels of less than $2 per thousand cubic feet common in the past two years.

Raymond James & Associates predicted last week an average price of $6 per thousand cubic feet in 2003, up from a previous estimate of $5. The Wall Street consensus is $4.40, and the New York Mercantile Exchange futures market is trading with an expectation that prices will hold above $5.50.

Oklahoma City gas price expert Tony Say predicted that prices will stay above $3.50 throughout the summer. Bruce Bell, chairman of the Mid-Continent Oil and Gas Association's Oklahoma division, estimated that prices would average above $5 this summer.

``I think the message here is that, because of the storage level, prices will be higher than they would be under normal circumstance,'' said Donald Murry, vice president of Oklahoma City-based C.H. Guernsey & Co.

The Oklahoma Index Price for natural gas plunged by 46 percent to $4.60 in April, down from $8.62 in March. April's index price is 39 percent higher than last year's level of $3.32 per thousand cubic feet.

``April is always considered a shoulder month because there is just not a lot of demand,'' said Say, president of Oklahoma City-based gas-marketing company Clearwater Enterprises Inc. ``Although we have seen quite a bit of demand from the storage side this year.''

Nearly 1,000 rigs are actively exploring for oil and natural gas nationwide, up 26 percent from 761 rigs this time last year, according to Houston-based Baker Hughes Inc. But production levels continue to decline.

About 1,100 rigs must be exploring for natural gas just to keep up with demand, Bell said. Of the 962 active rigs, only 781 are looking for gas.

Production companies have been reluctant to ramp up drilling activity because of fear that prices will quickly fall again, as they did just months after gas prices set a then-record high of nearly $10 in January 2001.

``We've been having a steady increase, but every time companies stack their rigs, they lay off drilling crews,'' Bell said. ``Even if everybody wanted to go out tomorrow and start drilling, crews would have to be assembled and trained. Adding 10 to 15 rigs a week is probably the best we're going to see.''

Most experts expect to begin winter between 2.6 trillion cubic feet and 2.8 trillion cubic feet in storage, well below the 3.2 trillion cubic feet in storage four months ago.