NATURAL gas prices fall sharply

Saturday, June 30th 2001, 12:00 am

By: News On 6

OKLAHOMA CITY (AP) _ Natural gas prices have dropped 18 percent in the past month, and some analysts believe that declining demand for the fuel could lead to even lower prices this winter.

The Oklahoma index _ the average price at which much of Oklahoma-produced gas is contracted for sale during July _ was fixed Friday at $3 per thousand cubic feet, said Tony S. Say, president of Clearwater Energy Marketing of Oklahoma City.

The index is 29 percent below last year's July index of $4.20 per mcf. But the price drop is less than the 24 percent drop one month ago, when May's $4.80 index price plunged to $3.65 for June.

``The market is definitely down, way down,'' said Say.

Price spikes as high as $9.90 per mcf sent natural gas bills soaring last winter.

Say said the price drop is primarily due to the speedy rate at which gas is being stored for next winter and to cooler weather in many parts of the nation.

The high gas storage rate is having a bearish affect on the market, he said. It suggests strong supply and a lower degree of demand from the non-storage sector.

If gas storage remains at high levels through Nov. 1, that should mean plenty of available supply and less demand for ``spot'' gas next winter.

Gas prices have also been pushed down by lower industrial demand, said Rankin Schurman, vice president of trading for OGE Energy Resources in Oklahoma City.

``Virtually every industry was affected by this. We've seen a major decline in demand,'' Schurman said.

At the height of the winter price spike, some companies even shut down industrial operations and made money by selling their natural gas allotments to others, Schurman said.

But weather changes and higher demand for inexpensive natural gas could cause prices to rebound.

``There are still people who think prices are going to hit bottom pretty soon and come back strong,'' said Ramiro F. Rangel, vice president of marketing for Louis Dreyfus Natural Gas of Oklahoma City.

A surge in summer temperatures would increase demand for air conditioning and would create a corresponding increase in demand for natural gas for electricity generation.