CANADIAN OILPATCH / NATURAL GAS
November 5, 1996
WHAT A GAS
TIGHT SUPPLY HAS NATURAL GAS PRODUCERS EYEING CASH WINDFALL
Western Canadian natural gas producers will enjoy strong commodity prices this winter due to lower-than-normal U.S. inventories and growing demand there, say industry analysts.
And experts say if Mother Nature delivers another bitterly cold winter like last year, Alberta-based producers and energy marketers are poised to reap a major spot market windfall.
"The outlook is very favorable, very bullish," Peter Linder, a senior oil and gas analyst with CIBC Wood Gundy Securities, said yesterday.
"I am looking for NYMEX prices to likely exceed $3 (US) per mcf (thousand cubic feet)," he said, up from a year-to-date average of about $2.65 US per mcf on the New York Mercantile Exchange.
Linder's optimism is fuelled in large part by U.S. storage levels of natural gas for home heating, which he says are at their lowest level in 10 years.
"If we get a cold winter like last year, I could see even $4 (per mcf) on NYMEX," he said, noting it would take an extremely warm winter throw off his forecast.
The long-range weather picture in the U.S. certainly looks promising.
The U.S. National Weather Service last week said it's forecasting below-normal temperatures for November through January in the Northeast and much of the Midwest.
Tight inventories -- especially in California -- have already begun to impact the Alberta marketplace.
That increased demand has drawn down the surplus of gas in Alberta and driven up the Alberta spot price to about $1.55 US per mcf from $1.30 US per mcf, said Linder.
Roland George, vice-president of natural gas research for the Canadian Energy Research Institute, said pipeline constraints out of Western Canada will continue to curb commodity prices for the next couple of years.
However, George agreed the door is wide open to extreme volatility in the short-term market brought about by deep-freeze weather. |
