January 21, 2002; Long-Term Natural Gas Turns Up On A Weekly Basis

We have a new tool, six-year natural gas quotes.  One of the positive consequences of the tragedy of Enron is that energy trading may be more in the open on a public exchange.  The New York Mercantile Exchange has risen to the occasion with more quotes.  As of January 18, 2002, natural gas was changing hands at prices that averaged $3.17 per mmbtu for the next six years while oil quotes averaged $20.22 per barrel (see Chart).

Six-Year Natural Gas Turns Up For The Week

 It is a fact that long-term natural gas price moved up last week.  We will be watching carefully to see if the uptrend is sustained.  Further out we believe that natural gas can regain the premium it held to oil for a while last year.  We also believe that oil will have periods of higher prices that present investment opportunities. 

 One-Year Natural Gas Depressed

 Near term we can see that natural gas is already depressed both relative to oil and to long-term natural gas.  Whether it will become more depressed is an open question.  Our view is that bouts of lower near term prices are possible mainly because seasonal inventories are high, but the duration of those bouts is likely to be limited.