1. Natural Gas Weekly Storage Forecast - 02/08/01 Gary Clark
609/897-1174
Storage Withdrawal as Expected; Brandon Balagna-Toal
Futures Up on Colder 6-10 Day Weather Outlook 303/291-5257
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• Yesterday’s AGA report showed a 105 Bcf withdrawal for the week ended 2/3. This was only
slightly below our forecast of 110 Bcf and roughly in line with street expectations of a 103
Bcf withdrawal.
• Storage levels are now at 1,136 Bcf, which is 36% below the 5-year average of 1,552 Bcf and
37% below last year’s level of 1,562 Bcf.
• Looking ahead to the week ending Feb. 10, the overly conservative NOAA forecast calls for
18% warmer-than-normal temperatures, as represented by 167 HDD’s, which we are adjusting
down to 7% warmer-than-normal, or 189 HDD’s, unchanged from last week. Therefore, we are
reducing our withdrawal forecast from 135 Bcf to 105 Bcf - also unchanged from last week
(see chart below).
• The NYMEX (March) futures contract closed yesterday at $6.24/Mmbtu, up $0.48 on the day, but
still down roughly $0.50 for the week. We believe yesterday’s jump was primarily due to the
issuance of a new 6-10 day weather forecast showing a turn to colder weather across the
country (which occurred within an hour of the release of the withdrawal and storage level
numbers). Interestingly, March futures prices spiked $0.36/Mmbtu shortly after the release
of the short-term weather forecast (in addition to a $0.12/Mmbtu increase over the prior
day’s closing price in anticipation of the release of last week’s storage/withdrawal data),
indicating the relative influence of near-term (weather) expectations on storage/withdrawal
levels and therefore forward prices, with ¼ of the $.48 daily price movement due to
expectations of last week’s storage/withdrawal data and the other ¾ due to future
expectations of near-term weather conditions – and it’s effect on next week’s
storage/withdrawal situation.
• We now project storage will reach 530 Bcf on April 1 - still an all-time low. This implies
that withdrawals for the remainder of the season will average 76 Bcf per week, roughly in-
line with the prior 6-year average.
• We continue to believe that short-term events - such as the weather, the volatility of the
NYMEX contract, and storage withdrawals, are simply that – short-term events.
• Over the next ten months we believe the focus will shift to the more important fundamental
price driver - that is, supply will not be sufficient to meet demand and rebuild storage to
adequate levels in time for next winter.
• While we have likely averted a major crisis this winter (a good thing), we continue to see
upward pressure on gas prices and E&P stock prices throughout the spring, summer and fall,
as we struggle to rebuild perilously low inventories. Our favorite E&P names continue to be
Barrett Resources (BRR) and St. Mary Land (MARY).
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2. Storage Levels with HDD's
0
50
100
150
200
250
300
10/27/00
11/03/00
11/10/00
11/17/00
11/24/00
12/01/00
12/08/00
12/15/00
12/22/00
12/29/00
01/05/01
01/12/01
01/19/01
01/26/01
02/02/01
2/9/2001E
2/16/2001E
2/23/2001E
3/2/2001E
3/9/2001E
3/16/2001E
3/23/2001E
3/30/2001E
HDD's
0
500
1,000
1,500
2,000
2,500
3,000
StorageLevels
Normal HDD's Actual HDD's
Ending Storage Current Yr Actuals Current Yr Estimates
Storage Levels/Injections/Withdrawals and HDD Data
Ending Storage
Normal Actual Estimated Percentage Beginning Injections/ Current Yr Current Yr Prior Year Percentage
Date HDD's HDD's HDD's Difference Storage Withdrawals Actuals Estimates Actuals Change
10/27/00 83 47 -43.4% 2,642 70 2,712 2,995 -9.4%
11/03/00 99 83 -16.2% 2,712 36 2,748 3,007 -8.6%
11/10/00 112 122 8.9% 2,748 (6) 2,742 3,016 -9.1%
11/17/00 129 176 36.4% 2,742 (94) 2,648 2,996 -11.6%
11/24/00 145 195 34.5% 2,648 (146) 2,502 3,001 -16.6%
12/01/00 162 168 3.7% 2,502 (73) 2,429 2,932 -17.2%
12/08/00 180 213 18.3% 2,429 (158) 2,271 2,859 -20.6%
12/15/00 191 220 15.2% 2,271 (158) 2,113 2,743 -23.0%
12/22/00 202 261 29.2% 2,113 (175) 1,938 2,570 -24.6%
12/29/00 209 265 26.8% 1,938 (209) 1,729 2,437 -29.1%
01/05/01 214 238 11.2% 1,729 (167) 1,562 2,326 -32.8%
01/12/01 216 210 -2.8% 1,562 (103) 1,459 2,212 -34.0%
01/19/01 215 203 203 -5.6% 1,459 (90) 1,369 1,369 2,017 -32.1%
01/26/01 216 218 198 -8.3% 1,369 (128) 1,241 1,241 1,775 -30.1%
02/02/01 210 189 171 -18.6% 1,241 (105) 1,136 1,136 1,562 -27.3%
2/9/2001E 203 189 -6.9% 1,136 (105) 1,031 1,404 -26.6%
2/16/2001E 191 191 0.0% 1,031 (115) 916 1,268 -27.7%
2/23/2001E 179 179 0.0% 916 (110) 806 1,194 -32.5%
3/2/2001E 167 167 0.0% 806 (80) 726 1,157 -37.2%
3/9/2001E 150 150 0.0% 726 (72) 654 1,126 -41.9%
3/16/2001E 136 136 0.0% 654 (68) 586 1,064 -44.9%
3/23/2001E 122 122 0.0% 586 (45) 541 1,036 -47.8%
3/30/2001E 110 110 0.0% 541 (11) 530 1,031 -48.6%
Stifel, Nicolaus & Company, Inc. research also available online at http://www.multexnet.com
and http://www.firstcall.com
Stifel, Nicolaus & Company, Inc.
One Financial Plaza 1125 17th
Street
501 N. Broadway Suite 1600
St. Louis, Missouri 63102 Denver, Colorado 80202
314 342-2000 303 296-2300
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