Going into this summer, at least one energy-analyst team thought declining U.S. and Canadian natural gas supplies would drive a tighter gas market and force year-over-year storage inventories lower, to a summer-ending level of 3.46 Tcf (trillion cubic feet). However, "our initial assumptions were wrong," says J. Marshall Adkins, director of energy equity research for Raymond James & Associates in Houston. "We now believe the gas markets could be headed for a late summer meltdown, similar to what we saw last year when gas prices plunged from nearly $8 per thousand cubic feet (Mcf) in early August to around $4 at the end of September," he says. "[This is because] our 2007 summer-ending estimates now show storage levels trending toward a bearish 3.5 Tcf." The major culprit behind this predicted storage build, he says, is stronger-than-expected productivity from rapidly growing onshore U.S. resource plays such as the Barnett shale, which has temporarily overcome declining core U.S. gas supply. For more on this, see the September issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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