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WTI to average $65 in ’06, $61 in ‘07 EIA expects continued market tightness, high oil, natural gas prices for next 2 years; U.S. demand contracted 0.3 percent in 2005 Petroleum News
The Department of Energy’s Energy Information Administration expects many of the same global factors that drove oil markets in 2005 to continue to affect markets in 2006 and 2007. The agency said Feb. 7 that low world spare oil production capacity and rapid world oil demand growth are expected to continue while other factors, such as the frequency and intensity of hurricanes, other extreme weather and geopolitical instability, are less certain.
EIA said it expects the price of West Texas Intermediate crude oil to average $65 per barrel in 2006 and $61 in 2007, compared to a 2005 average of $56 per barrel. The retail price of regular gasoline, which averaged $2.27 per gallon in 2005, is projected to average $2.45 in 2006 and $2.34 in 2007.
Henry Hub prices are projected to drop: natural gas averaged $9 per thousand cubic feet last year; the 2006 price is expected to average $8.87 per mcf; and the 2007 price $8.70 per mcf. Domestic energy demand growing Domestic energy demand is expected to increase at an average rate of about 1.4 percent in 2006 and 2007, “contributing to continued market tightness and projected high prices for oil and natural gas,” the agency said.
It said January in the United States was 25 percent warmer than normal, pushing natural gas prices lower than projected in January.
Oil prices, by contrast, were kept high by cold weather in parts of Asia and Europe and by uncertainties over supplies from Nigeria, Iran and Iraq.
While recovery of production after storm damage from hurricanes Katrina and Rita continues, the Minerals Management Service expects some 255,000 barrels per day of oil production and 400 million cubic feet per day of natural gas to remain offline when the next hurricane season starts June 1. Production slowed by mature fields On the global oil market, while new supplies are expected from both Organization of Petroleum Exporting Countries and non-OPEC over the next two years, world oil production capacity is expected to increase only slightly because many mature fields, particularly in the North Sea, Mexico and the Middle East, “are showing substantial declines,” the EIA said.
Non-OPEC supply grew an average of 800,000 bpd between 1995 and 2005, and is projected to grow by 800,000 bpd in 2006 and by 1.6 million bpd in 2007, with production increases of 100,000-200,000 bpd expected in the Caspian, Canada, Angola, Russia, Brazil and Mexico. Large new projects coming on in 2007 are expected to result in increases of almost 500,000 bpd in Angola, almost 400,000 bpd in the Caspian and more than 200,000 bpd in both Brazil and Canada.
World oil demand growth is expected to increase from 1.2 million bpd in 2005 to 1.6 million bpd in 2006, largely because U.S. demand is projected to recover from a net decline in 2005 to show growth of 350,000 bpd in 2006.
The EIA attributed a 0.3 percent decline in U.S. petroleum demand in 2005, the first since 2001, to record high prices, hurricane-related disruptions, airline consolidations and a mild winter.
World demand growth is projected to increase to 1.9 million bpd in 2007 due to economic growth in developing Asian countries excluding China, where demand growth is projected to stay on an overall annual trend of some 500,000 bpd per year.
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