Investment bank Goldman Sachs on Monday cut its 2013 US natural gas price forecast to $3.75/MMBtu form $4.25/MMBtu, saying mild winter weather across the US has failed to put a serious dent in storage levels.
The bank said higher levels of coal-to-gas switching in the power sector would be needed to avoid approaching storage capacity by the end of the 2013 injection season, meaning that "natural gas will need to price lower."
"We now expect 2.4 Bcf/d of coal-to-gas switching will be needed on average in 2013 to reach comfortable inventory levels of 3.85 Tcf by the end of the summer, up from 2.1 Bcf/d previously," Goldman said.
Goldman said it expects gas prices to average $3.25/MMBtu in the first quarter, $3.75/MMBtu in the second quarter, $3.75/MMBtu in the third and $4.25/MMBtu in the fourth. It predicted the average price in 2014 will be $4.25/MMBtu.
The bank said its current 2013 price outlook is "bullish" relative to the average forward curve price of $3.50/MMBtu.
Also on Monday, Raymond James and Jefferies & Co. cut their gas price estimates, citing mild December temperatures and forecasts calling for normal to above-normal temperatures across key eastern US market areas.
Raymond James said that while gas prices could still rally on a January-February cold snap, it is cutting its first and second quarter 2013 estimates by 75 cents to $3.50/Mcf and $3/Mcf respectively.
Jefferies raised its winter exit inventory estimate by 265 Bcf to 2.1 Tcf and cut its first-quarter price forecast to $3.60/Mcf from $3.75.
Both Raymond James and Jefferies cut their 2013 price forecasts by 50 cents to $3.25/Mcf and 4 cents to $3.40/Mcf, respectively.
Raymond James also released its initial 2014 gas price forecast of $3.75/Mcf and maintained its long-term gas price forecast of $4.25/Mcf.
Both analysts also released preliminary estimates for storage at the end of the injection season, which traditionally ends November 1, with estimates of 3.665 Tcf at Jefferies and 4 Tcf from Raymond James.
Jefferies estimated that the pace of injections in 2013 will be 24% above last year, assuming normal summer temperatures. That assumption, however, may miss the mark given that that past three summers wee at least 20% warmer than normal, Jefferies said.
The companies also cited continued growth in gas production because of associated gas output from oil wells, a reversal of price-related shut-ins of early last year and the expectation of additional pipeline capacity in the Marcellus Shale.
Jefferies focused on the improving hydro/nuclear output, while also mentioning that coal will keep any gas rallies in check.
"Gas has sustained a 20%+ market share in generation of power, which is similar to last year but above the mid-teens average of the last decade," Jefferies said. "Low hydro and nuclear output have boosted gas demand. However, precipitation and snowpack levels in the Rockies are rapidly improving as is nuclear operating rates."
