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To: Dale Baker who wrote (24384)	3/11/2001 2:39:33 PM
From: Dale Baker	Respond to of 118717

Barrons on natural gas - a clearheaded view, IMHO: Modest temperatures won't end the market's bullish storage scenario. Supplies remain low, even though we won't run out by the end of the winter heating season on March 31, and we probably won't even hit our last low of 559 billion cubic feet (BCF) of gas, set in the winter of 1995-96. Current natural-gas storage levels are still 40% below normal. That indicates not only a great need for "big-time" injections into the fall, as Solberg puts it, but also shows that despite the natural-gas rig count at a record level, the industry hasn't been able to effectively boost supplies. Gas rigs total 1,151 now, above the prior record of 1,032 in 1997, and the highest in over a decade. Yet production was down about 1% in the fourth quarter, compared with the level a year earlier, and was only 0.4% above the third quarter's output. "There is no supply growth," says Featherston. "The rigs are in the wrong area." Feathertson explains that instead of truly exploring for new reserves, most companies are simply exploiting already tapped areas. "Drilling in Oklahoma is not going to do it," he says. Companies need to be able to explore places like Anwar, in northern Alaska, or the Northwest Territories in Canada, places that are currently mostly off-limits, he maintains. Thus, "there isn't much we can do on the supply side." Yet, given the current price selloff in gas, one of the market's main problems -- fuel switching -- should abate. Indeed, for the April bid week -- the period in March during which companies lock in supplies for the coming month -- gas again became competitive with heating oil. "Lost demand should return now," says Featherston, who estimated that at one point in January, the American Gas Association's withdrawal data indicated a loss of eight billion cubic feet of gas demand out of the nation's normal 60 billion cubic feet per day needs. As gas prices remain below heating oil prices, "people will switch back," he says. But the market is walking a tightrope. Fickle industrial users may find by summer, when about two billion cubic feet of incremental demand from new power plants are expected to come on line, that natural gas again may not be as economical as heating oil. In sum, don't expect any big rallies; but don't expect another big selloff.