Here is the government data for total natural gas inventories' average for the last ten years, with 2003 and 2004 forecast at the 2003 levels. 2003 was a colder year than the past averages, will have that data later. . . and if we use 2003 data for drawdown and supply, we will be in better shape than last year due to the higher inventory levels that we started the heating season. The difference is that the price of competitive alternative fuels are higher now, allowing the price to float higher for the continued LIFO purchase of the inventory throughout the winter. . . however, the current inventory supply is NOT an issue, and the weather is not as much of an issue due to the higher level of inventory for the beginning of the season. Therefore the current issue is one of potential supply interruptions during the next 3 months. . . currently, unless there is a disruption of the current supply routes and schedules, NGAS supply issues should not be critical or in any panic situation. sportsguy
Your analysis is consistent with my understanding. It appears the fears of a supply crisis this winter were overblown. I suppose cold weather could still create a problem, but we had an extremely cold winter last year. Basically, I am not that bullish on natgas itself or E&P companies at these levels. How are you playing this market?
I am long NGAS, assuming that with the price of nat gas rising as an alternative to petro, the companies should use the profits to expand explor & product facilities, which would be good in the long run. And since the energy prices are not coming down at all with a rebounding economy creating more demand, i expect that the prices will not fall as dramatically as last spring, resulting in a more profitable 2004. While the demand rises, the increase in storage capacity has not kept up. If this year we get to the same low level of inventory that we had last year, my interpretation will be that we are running into a shortage of storage, not supply, and that will cause some prices to remain high, as more on time deliveries are required to maintain adequate supplies for the winter, unless we have a very warm winter. . . we shall see sg