Natural Gas Spot Prices: Base Case and 95% Confidence Interval

Sources: History: Natural Gas Week; Projections: Short-Term Energy Outlook, January 2001.

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• We expect to see peak monthly spot wellhead prices this winter of over $8.40, the monthly average reported for December 2000. Recently, concern about cold weather and low stocks pushed daily spot gas prices over $10.50 per mcf. However, in early January of this year, forecasts of warm weather pushed the price down by more $1.00 per mcf in one day, indicating the extraordinary volatility in the current U.S. market.

• The gas storage situation in the United States has not improved over the last few months, a sign that demand remains strong. We believe that the 30-year records for (seasonally adjusted) storage lows may be challenged throughout the heating season.