Goldman Sachs Group Inc. cut its U.S. natural gas price forecast for the Northern Hemisphere winter by 23 percent because of higher-than-expected output and lower demand from power plants.
Gas futures, which have fallen 42 percent since July 3, may trade at $10.30 per million British thermal units this winter, down from a July forecast of $13.40, analysts Samantha Dart and Jeffrey Currie said in a report dated Aug. 15. The U.S. investment bank reduced the average price estimate for September and October to $9.25 from $13.
“Higher U.S. production has led us to lower our price forecast,” the analysts said. “However, current U.S. natural gas prices are oversold as they stand below estimated marginal costs of production.”
Goldman lowered its average April-August 2009 gas price forecast to $9.10 per million Btu from $10.30 estimated earlier, the report said.
“Part of the softness in the U.S. natural gas balance may be explained by lower demand for power generation, likely due to weakness in U.S. economic activity,” the report said.
[update tomorrow – replace chart]
Bloomberg Nymex – as of July 31st, NG is at $9.25/1000 cubic feet – last year at this time it was about $6.20
Bloomberg City Gate Spot – $9.95/1000 cf
1000 cubic feet is approximately the same as 1million BTU (or ____)
retail prices seem to range about $4-$8 above the Nymex or City Gate Spot Price
Last year in September City Gate averaged $7.68 and residential $15.73
Let’s assume that City Gate will be $10-$12 this winter (although it could be higher). That would make residential at most 30% higher. But the price of gas is only a portion of a homeowner’s bill. A large percentage is delivery and other fees.
This requires more detailed analysis, but I don’t see NatGas home heating bills being more than 20% more expensive than last year. Wholesale natgas is definitely lagging the historical correlation with crude oil.
BOE conversion factor and units –
start setting up link in NG tab/Page