As most of our readers know by now, we have been bearish on U.S. natural gas prices for a while. Two

months ago, our 2009 gas price forecast of $6.75/Mcf was more than $3.00/Mcf BELOW consensus

estimates. Since then, U.S. natural gas fundamentals have gotten even worse. Our prediction for 3.45 Tcf

of summer-ending gas storage was close this year, despite having already shut in nearly 300 Bcf of

supply due to hurricane disruptions. Heading into the winter and next year, we now believe that

significant gas rig count reductions and forced well shut-ins will be necessary to rebalance the U.S. gas

equation in 2009/2010. That means the 2009 gas price outlook is still very ugly. That being said, investors

should not rule out the possibility of a short-term, weather-driven gas price rally over the next six weeks. We

emphasize the SHORT-TERM. Given the current over-supplied gas situation, even a colder-than-normal

winter is unlikely to prevent a gas price collapse in 2009.