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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Claude Cormier who wrote (19949)	3/8/2003 6:14:17 PM
From: quehubo	Read Replies (4) \| Respond to of 206131

Claude - Have you viewed my worksheet on WWW.oilviews.com? Based on the present supply / demand balance 3-5 bcf per day needs to be destroyed in order to have a safe level of storage on 11/1. Based on last years supply / demand I expect to start the fill season at 550 bcf and end it at 2,000 bcf. This is short at least 600-800 that I believe the market will destroy at any price. I estimate that 4 bcf per day of demand destruction will take us to 2,800 bcf. Now destroying 4 bcfpd in the Winter heating season is possible as there are plenty of consumers who can switch heating fuel from NG to Oil. Outside of the heating season this fuel switching will be very difficult. I am not sure if there is enough industrial demand that can be switched to #2 oil to provide 4 bcfpd of destruction. Utilities who must have NG for next Winters heating season and for this Summers peaking season will pay whatever price it takes to meet their legal/contractual responsibilities. As they bid for NG to put into storage they will be competing against present consumption. By the time the price of NG reaches the price of #2 oil, some demand will be destroyed. By the time they reach the #2 oil price plus some margin up, they will cause fuel switching. Many power generators have much lower efficiency on oil and they wont switch until NG is 10% more than #2 oil. Once NG is freed up when its price is over the price of #2 oil, if supply is not adequate the price of NG will be bid up to force off more demand. I think the major consumers of NG know that the production of NG in NA will be lower in 2003 than in 2002 even with a massive drilling effort if it started today. So the question is how much are they willing to pay now in order to free up supply for storage vs how much will they be willing to pay after a few months time has passed and there are less days available to catch up. The present NG & #2 oil futures from April on tell me the market is not yet preparing itself for next Winter as prices are not high enough to encourage #2 oil consumption. Summer peaking power in the USA is mostly NG fired. They are price setters this will enable many with onsold power from non NG fired plants to make a fortune setting bids just under the NG price + spark spread.