Note:  Raymond James and Associates is predicting gas prices to average $4.50 
in 2001.  Consensus First Call estimates 
are now averaging $3.85 for 2001.  Read on to hear what the brokerage houses 
are predicting. Lorna

Raymond James Sends Chills Up Gas Buyers' Spines

Raymond James and Associates gave gas buyers a Halloween shriek yesterday 
that could be producing chills all the way through next April, perhaps even 
all of next year. The firm released a chilly forecast of double digit gas 
prices this winter and said it expects prices to average $4.50/MMBtu in 2001. 

"Regardless of a potentially warm winter, it is highly likely that the United 
States will experience regional shortfalls in gas supply," Raymond James said 
in its latest energy report. "In other words, gas storage should test 
all-time low levels this winter regardless of weather. 

"The situation should get worse, not better, next year. If we end the winter 
at all-time low storage levels and we cannot inject more gas next summer than 
we did this summer, then we should enter next winter with dangerously low 
levels of natural gas," Raymond James added. 

"We believe that the United States will see gas demand increase by about 9 
Bcf/d (or 15%) by the end of 2002 as new gas fired electric generation plants 
come on line. Unfortunately, even if every drilling rig is working, U.S. gas 
supply is likely to increase by less than 4 Bcf/d by the end of 2002. This 
means that gas prices must rise sufficiently to crimp over 5 Bcf/d of demand 
out of the gas supply/demand equation by 2002. At $5/Mcf, only about 1.5 
Bcf/d of demand has been reduced so far. That means that gas prices must go 
higher over the next several years." 

However, Raymond James' bullish predictions are a far cry above the crowd on 
Wall Street. Plenty of other analysts have upped their forecasts recently to 
hair-raising levels. The First Call consensus for 2001 now is up to 
$3.85/MMBtu. But that's still 65 cents less than the Raymond James's 
prediction. 

Not everyone wants to scare the daylights out of buyers, however. Deutsche 
Bank believes analysts and the futures market participants at Nymex "are 
getting bold and in our view maybe too bold." 

"With the natural gas rig count approaching 850, it is hard to believe that 
there will not be a fairly substantial supply response in 2001," Deutsche 
Bank said in its Energy Wire on Friday. "Analysts at the U.S. Energy 
Information Administration are expecting dry gas production to rise to 18.94 
Tcf (51.9 Bcf/d) in 2001, after being stuck at near 18.7 Tcf (51.2 Bcf/d) for 
several years. Our own estimate for 2001 looks for 19.1 Tcf (52.3 Bcf/d) and 
we have seen credible forecasts reaching as high as 19.7 Tcf (54 Bcf/d). In 
general we think the EIA is way too conservative and that our own number is 
more likely to be adjusted higher rather than lower. A gain in domestic 
production of 2 Bcf/d to 53.2 Bcf/d could be doable. Imports appear likely to 
be up 0.5 Bcf/d. If demand rises by 2.5%, that would account for about a 1.5 
Bcf/d gain. All other things equal, this implies that storage can refill and 
suggests that prices are going to come under some downward pressure." 


------------------------------------------------------------------------------
--