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EIA lowers WTI projection to $59.50 In January agency said 2007 price expected to average $64.42, down from $66 per barrel in ’06; Henry Hub up slightly at $7.10 Kristen Nelson Petroleum News
The Energy Information Administration has lowered its 2007 price projection for West Texas Intermediate to $59.50 per barrel. In January the EIA, part of the U.S. Department of Energy, was projecting $64.42 a barrel for WTI in 2007. WTI averaged $66 a barrel in 2006.
The agency attributed the recent decline in oil prices (down about $12 a barrel between mid-December and mid-January) to higher-than-expected inventories at the end of 2006 and warm weather. OPEC members responded with production cuts beginning in November. Despite these cuts from the Organization of Petroleum Exporting Countries, “WTI oil prices fell by $6 to $55 per barrel in January due to the warm weather, weak oil demand, higher spare oil production capacity and above-normal inventory levels.”
The increased capacity was a result of lower OPEC output in the fourth quarter of 2006, the agency said, “easing oil market tightness by providing an additional cushion against any unanticipated supply problems that might arise.”
OPEC has announced a second round of cuts effective Feb. 1 and the agency said it is projecting those cuts, along with an expected increase in oil demand, should put inventory levels at the middle of the normal range by mid-2007 and “support an increase in OPEC exporters’ production during the second half of 2007.”
U.S. demand down in ‘06 EIA said initial estimates of U.S. petroleum consumption in 2006 are about 0.9 percent below 2005, led by a 27 percent drop in consumption of residual fuel oil as relatively lower natural gas prices caused a switch from fuel oil to natural gas by electric power generators. 2006 also saw warmer-than-normal weather in both the first and fourth quarters which dampened heating oil demand.
Total U.S. petroleum product consumption is projected to increase by 1.4 percent in 2007 and by 1.5 percent in 2008.
Domestic oil production is estimated to have averaged 5.1 million barrels per day in 2006, down slightly from 2005.
Production is expected to be up in both 2007 and 2008, to 5.3 million bpd and 5.4 million bpd respectively, reflecting recovery from the 2005 hurricanes and the startup of new production in the deepwater Gulf of Mexico.
Natural gas consumption expected to grow Mild winter weather in the U.S. Northeast and Midwest early in the heating season reduced natural gas demand, tempering the Henry Hub spot price: it averaged $6.90 per thousand cubic feet in December and $6.75 per mcf in January. If weather remains normal, the Henry Hub price is expected to average $7.10 per mcf in 2007 and $7.60 per mcf in 2008.
EIA expects U.S. natural gas consumption to increase 2.7 percent in 2007.
Total domestic production of dry natural gas rose 2.2 percent in 2006, and is projected to grow 2.7 percent in 2007 and 0.7 percent in 2008.
Net imports are estimated to have fallen 5.3 percent in 2006 and are projected to rise by 0.5 percent in 2007, then 7.9 percent in 2008, the agency said, as declining pipeline imports of natural gas from Canada are offset by rising liquefied natural gas imports, expected to increase to 0.8 trillion cubic feet per year in 2007 and 1.1 tcf per year in 2008.
Working gas storage at Jan. 26 was an estimated 2.571 tcf, 152 billion cubic feet above year-ago storage and 454 bcf above the previous five-year average.
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