Canadian natural gas prices,
which have fallen 25 percent in the past 10 weeks, could double
by this winter due to demand by gas-fired electrical utilities
in the United States, analysts said.
Expressed in U.S. currency, Canadian day-to-day prices in
Alberta have declined to $3 per unit from $4 on May 30, while
U.S. prices have remained steady during that period at about
The price difference between Canadian and U.S. gas has
widened to $1.35 a unit from its traditional level of 35
"The price decline is a temporary phenomenon,'' said
industry analyst Peter Linder of Research Capital Corp. "The
utilities in Eastern Canada aren't taking much gas at the
moment to put into storage and we've had no heat wave in
Chicago and New York, which are big buyers of Alberta gas.''
Gas in storage in Eastern Canada was down to 147 billion
cubic feet last week compared with 179 billion cubic feet in
the year-earlier period, according to the Canadian Gas
In the U.S., total storage inventories of 1.985 trillion
cubic feet were 366 billion cubic feet, or 16 percent, below
year-earlier levels and more than 200 billion cubic feet below
the five-year average.
"By the fall, that price difference should narrow as demand
increases when the utilities increase their injections into
storage,'' said Linder. "And if we get a cold winter, Canadian
prices could double from what they are now.''
A report by FirstEnergy Capital Corp. Monday noted that
the lack of significant hot weather in the U.S. this summer has
depressed electricity demand -- and prices for Canadian natural
The report's author, analyst Martin Molyneaux, said the
outlook for Canadian gas within the U.S. electricity generation
mix remains upbeat because of capacity constraints at nuclear
and coal-fired power stations.
Despite the roller-coaster ride of gas prices over the past
decade, gas-fired electricity generation in the U.S. had risen
to 15 percent of all power produced in 1999 from 12.5 percent
"Given our arguments that coal and nuclear generation are
very close to their available limits, we believe the immediate
choice of generation will be natural gas-fired power plants,''