LNG, storage to trim gas prices

North American natural gas prices are headed down later this year, pushed by a combination of increased imports of liquefied natural gas, a rise in U.S. production and a surplus of gas in storage, says a report by RBC Capital Markets analysts.

The forecasters expect prices could drop below US$5 per million British thermal units, compared with the $6-$8 band that they have been operating in over the last two months and the plunge they have taken since hitting an all-time high of $15.78 in December.

The firm predicts gas will average $6.50 for the second quarter, but post an average $7.50 for the year.

Joseph Allman, with RBC in Houston, said one of the greatest impacts on gas will come from a surge in LNG imports.

Gas for May delivery was up 5.7 percent to $8 on the New York Mercantile Exchange.

A prolonged period of mild weather across the U.S. in January and February left 1.7 trillion cubic feet in storage at the end of March, the greatest volume since records were first kept 13 years ago.

—Gary Park