Newspaper article THE JOURNAL RECORD

Low Natural Gas Prices Foreseen

Newspaper article THE JOURNAL RECORD

Low Natural Gas Prices Foreseen

Article excerpt

Mild weather and high storage levels have resulted in lower natural gas spot prices in 1994, according to industry representatives. These prices are not expected to increase much in the next few months unless cooler temperatures arrive.

Lower prices, which may be good for customers, hurt producers. Customers need to pay a good price to ensure they have supply and deliverability, according to Mike Smith, president of the Oklahoma Independent Petroleum Association.

Customers receive modest price increases if any, he said.

"What's important is that producers have a price that enables them to make a profit and to stay in business," Smith said. "The consumer's best interest is to ensure an adequate supply."

Low prices may force some producers to shut in gas, decreasing the amount of gas in the pipeline system.

Oklahoma's average natural gas spot price in 1994 was $1.68 per million British thermal units, according to Natural Gas Clearinghouse in Houston. The gas marketing firms monitors 18 pipelines in Oklahoma, Texas, Louisiana and Wyoming.

The state average dropped 14 percent from $1.96 per million British thermal units the previous year. In 1992, the state average spot price was $1.61 per million British thermal units.

This year's lower prices resulted from a mild winter heating season so far and the perception that the "gas bubble is drying up" and an equalization of supply and demand is occurring. That's according to Stephan Guy, vice president of gas supply for Oklahoma Natural Gas Co. in Oklahoma City.

Another reason for the lower prices in 1994 is because of the maturity of the storage market, said Jerry Peace, director of marketing and sales for Enogex Inc. of Oklahoma City. Enogex is OG E Electric Services' natural gas pipeline subsidiary.

Producers have injected at a more even rate in 1994 "instead of waiting until the last minute like last year, which created panic," Peace said.

However, storage levels are at an all-time high. If cooler weather does not arrive, the industry may have to make withdrawals from storage, he said.

Peace projected prices in the next few months will decline even further. …

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