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EIA expects $99 WTI by 4th quarter 2012 Energy Information Administration projects Henry Hub gas spot price average of $4.02 per million Btu this year, $4.50 in 2012 Petroleum News
The Energy Information Administration said Jan. 11 that it expects the price of West Texas Intermediate crude oil to average $93 per barrel this year, $14 higher than the average price in 2010. EIA, part of the U.S. Department of Energy, expects WTI prices to continue to rise in 2012, and to average $99 per barrel in the fourth quarter of that year.
EIA said in its short-term energy outlook that its forecast is based on the assumption that U.S. real gross domestic product grows 2.2 percent in 2011 and 2.9 percent in 2012, while world real GDP (weighted by oil consumption) is expected to grow by 3.3 percent this year and by 3.7 percent in 2012.
The Henry Hub natural gas spot price is expected to average $4.02 per million Btu this year, 37 cents lower than the 2010 average. EIA said it expects the natural gas market to begin to tighten next year, with the Henry Hub spot price increasing to an average $4.50 per million Btu in 2012.
World oil markets tighten EIA said it expects a continued tightening of world oil markets over the next two years, with world oil consumption growing an average of 1.5 million barrels per day through 2012 and growth in supply from non-Organization of the Petroleum Exporting Countries averaging less than 100,000 bpd.
The market is expected to rely on both inventories and significant production increases from OPEC to meet demand growth.
On-shore commercial storage in Organization for Economic Cooperation and Development countries remained high in 2010 but floating oil storage fell sharply, and EIA said it expects OECD inventories to decline through 2012.
Factors which could push oil prices higher or lower than expected include: A failure by OPEC to increase production as global consumption recovers; uncertainty in the rate of economic recovery, with fiscal issues facing governments domestically and globally; and unforeseen production issues.
Energy price forecasts uncertain WTI crude oil spot prices averaged more than $89 per barrel in December, EIA said, about $5 per barrel higher than the November average, “as expectations of higher oil demand, combined with unusually cold weather in both Europe and the U.S. Northeast, lifted prices.”
EIA said it had raised the first-quarter 2011 WTI spot price forecast by more than $7 per barrel from its December outlook, to some $92 per barrel, and expects the WTI spot price to rise to an average of $99 in the fourth quarter of 2012.
The agency’s projection for WTI spot prices averages $93 per barrel this year and $98 per barrel in 2012.
Last year at this time WTI for March delivery averaged $82 per barrel; this year WTI futures for March delivery averaged $91 per barrel.
“Based on futures and options prices over the first week in January, the probability that the monthly average price of WTI crude oil will exceed $100 per barrel in December 2011 is about 36 percent,” EIA said, with the probability that the price will be below $80 about 31 percent.
U.S. consumption grows EIA said preliminary data indicate total U.S. consumption of petroleum and non-petroleum liquid fuels increased by 350,000 bpd in 2010, up 1.9 percent, with major consumption growth in diesel fuel and heating oil (up 3.7 percent) and motor gasoline (up 0.7 percent).
With the ongoing economic recovery, U.S. liquid fuels consumption is expected to increase by 0.8 percent this year and by 0.9 percent in 2012, with motor gasoline and distillate fuel (diesel and heating oil) accounting for much of the growth.
Domestic crude oil production increased by 150,000 bpd to 5.51 million bpd in 2010, but is expected to decline by 20,000 bpd in 2011 and by an additional 130,000 bpd in 2012.
EIA said the 2011 forecast includes declines of 50,000 bpd in Alaska and 220,000 bpd in federal Gulf of Mexico production, almost offset by a projected 250,000 bpd increase in Lower 48 non-Gulf of Mexico production.
Lower 48 non-Gulf production is expected to increase by 70,000 bpd in 2012, while Alaska production declines by 20,000 bpd and Gulf of Mexico output is down by 180,000 bpd.
Imports of crude oil and refined products fell from 57 percent of U.S. consumption in 2008 to 49.4 percent in 2010. The EIA attributed the drop to the recession-driven decline in consumption and rising exports.
Liquid fuel net imports are forecast to average 9.6 million bpd in 2011 and 9.9 million bpd in 2012, some 50 percent and 51 percent, respectively, of total U.S. consumption.
Natural gas consumption down EIA said it expects total U.S. natural gas consumption to decline by 0.9 percent in 2011, led by a 2.7 percent drop in residential and commercial consumption due partly to a forecast of 1.3 percent fewer heating degree days this winter, but also because of changes in the way EIA collects and reports natural gas consumption data.
Natural gas consumption in the electric power sector is expected to fall by nearly 1 percent this year because of the forecast of a return to near-normal summer weather compared to very warm summer weather in 2010.
In 2012, total natural gas consumption is projected to grow by 1.6 percent to 66.5 billion cubic feet per day.
Total marketed natural gas production increased significantly last year, the EIA said, by an estimated 2.4 bcf per day, 4.1 percent, with declines in production in Alaska and the Gulf of Mexico offset by an increase in Lower 48 onshore production.
2011 production is expected to fall by 0.3 percent.
EIA said the latest data for monthly natural gas production, for October, showed a slight decline in Lower 48 production from September and said it expects this gradual decline to continue in 2011 because of a falling rig count in response to lower prices.
Baker Hughes reported rigs drilling for natural gas increased from 665 in July 2009 to 973 in April 2010, and then stayed relatively stable for six months. The rig count has fallen in the last several weeks, EIA said, and ended December at 919.
With a projected decline in production this year and an increase in consumption in 2012, natural gas prices should be stronger late this year and in 2012, the agency said, then as prices increase, production redounds, up 2.2 percent in 2012.
EIA said it expects higher forecast production during the first half of 2011 compared to last year, combined with decreased consumption, to moderate natural gas spot prices. It projects a spot price of $3.73 per million Btu in June to rise to $4.61 in December, averaging $4.02 for 2011. The spot price is expected to rise to $4.50 per million Btu in 2012.
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