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Record storage inventories pose downside gas price risk: CERA.

The operational limits of some portions of North America's natural gas storage system may be reached by fall, producing "real potential for an abrupt decrease in gas prices" as some storage fields become unable to handle additional injections, says an analysis by Cambridge Energy Research Associates (CERA).

Absent a warmer-than-normal summer or significant gas supply disruptions by hurricanes, CERA expects the Oct. 31 gas storage inventory level to reach 4,200 Bcf, a more than 95% fill of expected working gas storage capacity. Given end-of-cycle physical limitations on injections, and expected average September and October storage injections approximately equaling injection capability, CERA expects some storage fields, especially in the East, will be unable to accommodate additional injections.

"In today's North American gas market where prices arc market responsive, insufficient storage working capacity to accommodate all gas available for injection is likely to lead to a sharp and swift drop in spot gas prices." said CERA Director Ken Yeasting. "As gas prices fall toward $5 per MMBtu, displacement of coal-fired generation by gas-fired generation will provide additional demand and thus support gas prices and rebalance the market."
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Title Annotation:Cambridge Energy Research Associates
Comment:Record storage inventories pose downside gas price risk: CERA.(Cambridge Energy Research Associates)
Publication:Pipeline & Gas Journal
Article Type:Brief article
Geographic Code:1USA
Date:Jul 1, 2006
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