Experts uncertain on natural gas forecast

The price of natural gas has recovered from recent lows last month, but local and national experts are divided as to where costs are likely to head throughout the winter.

As usual, weather promises to be the most important factor.

"It's going to be interesting to see what happens with the weather," said Bruce Bell, chairman of the Mid-Continent Oil and Gas Association of Oklahoma. "The Farmers' Almanac says it will be a cold winter. But some weather services people rely on are saying the opposite. We have the tried and true against the more sophisticated prognosticators. We'll have to see where things come out."

The tumble from a record high of more than $15 per thousand cubic feet in January to a more than two-year low of $4.20 last month was attributed largely to a mild winter last year combined with increased natural gas production. Natural gas increased an additional 5 billion cubic feet last week, up to a record 3.45 trillion.

"I think you're going to see the price come off fairly significantly here in the next week or so," said Tony Say, Oklahoma City natural gas marketer and president of Clearwater Enterprises Inc. "The weather for next week pretty much across the country is forecast to be above average. Unless some major cold front comes in, I think we're going to see natural gas prices holding flat or going down a little bit into December."

Bell, however, dismissed the talk about record natural gas storage, pointing out that the record volume of gas currently in storage is only about 300 million cubic feet more than the average at this time over the past two years.

"It doesn't take but one cold week for us to have an unusually large draw that could entirely consume that surplus," he said. "I think we're liable to see prices head up from where they are now. I have a tendency to think we've had a couple of fairly easy winters and are more liable to have a colder winter."

The price of natural gas lost more than 70 percent of its value after hitting a record high of more than $15 per thousand cubic feet in January. The New York Mercantile Exchange price hit a more than two-year low of $4.20 in late September before rebounding. The price slipped 36.5 cents Thursday to close at $7.755 per thousand cubic feet.

Oklahoma producers generally are paid much less than the price set in New York. The Western Oklahoma Natural Gas Price Index is more reflective of Oklahoma wellhead prices. The index closed at $6.47 for November delivery, up 84 percent from $3.52 in October but down 40 percent from $10.80 one year ago.

Prices as low as have been experienced over the past two months have threatened some Oklahoma natural gas production, Bell said.

"Those prices hurt the various alternative plays that are now making up a larger and larger component of natural gas production," he said. "When we're talking about tight sands or coalbed methane or other more difficult projects, those require gas of more than $4 per (thousand cubic feet) to be profitable. Wellhead prices went down much further below pipeline prices, but they're rebounding nicely."

While lower prices have reduced profits for many Oklahoma producers, the state's natural residential gas utility consumers are unlikely to see similar savings, Say said.

"It will make a little difference in the later part of winter if prices drop, but utilities have bought and stored a lot of gas at $6 or $7 or higher," Say said. "I don't think consumers will see $10 or $12 gas this winter, but I don't think they'll pay much less than $7 or $8."