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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: TobagoJack who wrote (34710)6/4/2003 3:37:56 PM
From: energyplay  Read Replies (3) of 74559
 
Hi Jay - The natural gas situtation is commig to the well known fork in the road.

Grouping a continum in 4 outcomes

1) Prices decline under say $5.50 -$5.00.
Maybe 5 % chance of this still. Needs cool weather, successful drilling and lots of it, some coal burnig.

Good news is there is a lot of demand which will turn back on at about $5.00 which should keep the price from going much lower.

I think we might want to keep most of the royalty trusts, especailly since the are better than many other investments at this time and provide some inflation protection.

If we are heading for this, it could be useful to trim some of the high flyers - SJT & HGT come to mind.

2) Prices in the $5.50 - $7.50 range or so. Enough demand destruction that supply and demand balance. The lower end of thsi range is a more sustainable price - and could actually lead to more drilling than the higher price, which many would expect to be replaced with much lower prices.

In this price range, which could be the long term new level, it might be posssible to jsut sit on the Royalty trust for a number of years and collect dividends.

.

3) - Serious shortage - A warm summer and normal to slightly cooler winter would mean prices headign toward $8.00-$9.00, maybe spiking to $10.

4)- Severe shortage - Worse case / 'perfect storm' - warm to hot summer, not enough nuke activity, not enough coal burning or conservation. Follow with a 1 sigma cold winter. Price October - March would average more than $10, maybe hit $15.
Rationing and restrictions.

Ij 3) and 4) there is likely to be a time when we will

I will post a pointer to a link to Robry's charts showing how these play out.
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