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EIA expects $76 per barrel this winter Henry Hub natural gas spot price projected at $3.95 per thousand cubic feet this year, $4.62 in 2010; US natural gas consumption down Petroleum News
The U.S. Energy Information Administration said Dec. 8 in its Short-Term Energy Outlook that it expects the price of West Texas Intermediate crude oil to average $76 from October through March, with a dip to $75 early next year and a rise to $82 per barrel by December 2010, “assuming U.S. and world economic conditions continue to improve.”
The EIA forecast assumes growth in U.S. real gross domestic product of 1.9 percent in 2010 and a world oil-consumption-weighted real GDP growth of 2.6 percent.
The agency said it expects the annual average Henry Hub natural gas spot price to be $4.62 per thousand cubic feet next year, a 67-cent-per-thousand-cubic-foot increase from an estimated 2009 price of $3.95.
Working inventories of natural gas in the U.S. reached a record-high level of 3.837 trillion cubic feet on Nov. 27, the agency said, as mild weather throughout much of the country contributed to uncommon levels of storage increase for the month.
The Organization of Petroleum Exporting Countries began production cuts in January 2009, and EIA said that while compliance with the cuts has weakened and global oil inventories are “very high by historical standards,” the November WTI oil price averaged $78, continuing a generally upward price trend which began last February.
Consumption expected to grow EIA said it is forecasting a growth in world oil consumption next year to 85.2 million barrels per day, an increase of 1.1 million bpd over 2009 consumption, with countries outside the Organization for Economic Cooperation and Development likely to account for almost all of the growth. Projected OECD oil consumption growth is only 100,000 bpd next year, although U.S. growth is projected at 270,000 bpd after a very weak 2009.
Non-OPEC oil production is expected to average 50.3 million bpd this year, up some 600,000 bpd from 2008, with increases largely the result of higher production from the U.S., Brazil and the Former Soviet Union.
OPEC crude oil production is expected to average 29.1 million bpd this year, down more than 2 million bpd from 2008. EIA is projecting OPEC crude oil production to increase to an average of 29.6 million bpd next year in response to anticipated rebound in global oil demand.
$78 per barrel November average
WTI crude oil spot prices averaged $78 per barrel in November, EIA said, up more than $2 from the October average, reflecting improved expectations of global economic recovery and higher oil consumption offsetting concerns about the level of oil inventories.
EIA said it was forecasting weaker WTI spot oil prices over the next few months, falling to $75 in February, and rising to about $82 by the end of 2010. Crude oil prices were less volatile in November than in October, the agency said, with the WTI spot price trading within a $5-per-barrel range, roughly $75 and $80 per barrel, contrasting with October when the WTI spot price traded in an $11-per-barrel range, between $70 and $81 a barrel.
The December average price is likely to be lower, with The Associated Press reporting in mid-December that prices had slid below $69 a barrel due to signals from OPEC that it would not lower production at its scheduled Dec. 22 meeting.
Natural gas consumption down EIA said it expects U.S. natural gas consumption to decrease by 1.9 percent in 2009 and by an additional 0.4 percent next year. The agency said a steep decline in industrial demand and smaller but still significant residential and commercial declines have been partially offset by electric power consumption this year.
“Low natural gas prices relative to coal caused substantial switching to natural gas for baseload electric power generation throughout most of 2009,” EIA said.
A return to normal weather and expectations for economic growth are expected to drive natural gas consumption increases in the residential, commercial and industrial sectors next year, but the agency said it still expects total consumption to fall “as higher natural gas prices contribute to some reversal of the coal-to-natural-gas switching that took place in the electric power sector during 2009.”
Gas production up, down EIA said it expects U.S. marketed natural gas production to increase by 3.7 percent this year and to decline by 3.1 percent in 2010.
“Minimal hurricane disruptions and significant growth in production from onshore shale basins have contributed to the increase in domestic supply this year, despite a nearly 60 percent decline in the working natural gas rig count from September 2008 to July 2009,” the agency said.
Marketed production in the Lower 48, including the non-federal Gulf of Mexico, has declined since a peak in February, but EIA said “the recent dip in September production appears to be the result of shut-ins, maintenance and pipeline constraints, as opposed to declining field productivity,” and expects October and November production volumes to recover from the September dip.
“Shorter completion times and enhanced well productivity in shale basins contributed to sustained higher production levels amidst a dramatically lower rig count in 2009,” the agency said.
Natural gas imports by pipeline averaged some 9 billion cubic feet a day in the first nine months of the year, compared to 9.9 bcf in the same period of 2008, with lower drilling activity and production in Canada contributing to reduced pipeline imports this year. EIA said it expects pipeline imports will fall by 12 percent for the year, with persistent low rig counts in Canada expected to lead to lower Canadian natural gas production and lower U.S. pipeline imports next year.
Liquefied natural gas imports into the U.S. increased this year, averaging some 1.3 bcf per day through September compared to almost 1 bcf per day in the same period in 2008.
“Imports rose, albeit from very low levels in 2008, as new global liquefaction capacity added to supply while global LNG demand suffered under the economic crisis,” the agency said. It is projecting U.S. LNG imports to increase to 1.7 bcf a day next year with expected completion of additional global LNG projects, but said the “start-up dates for supply additions have historically been subject to delay.”
Record gas storage
The Nov. 27 volume of 3.837 tcf of working gas in storage was 487 bcf above the 2004-08 five-year average and 470 bcf above the level in the same week in 2008, EIA said.
If storage withdrawal between the end of November and the end of March is 6.1 percent greater than the previous five-year average, the end-of-winter, March 31, stocks will be some 1.845 tcf, the highest end-of-winter storage level since 1991, when inventories measured 1.912 tcf.
The average Henry Hub spot price of $3.77 per thousand cubic feet in November was 35 cents lower than the October average spot price, with prices depressed by warmer-than-normal November weather which reduced residential and commercial space-heating consumption by some 7 percent.
While EIA expects prices to increase as space-heating demands increase over the winter, “strong domestic production, a retrenchment of electric-power-sector natural gas demand and uncertainty about the extent of recovery in the industrial sector, should limit sustained upward price movements through the winter and well into next year.”
EIA is projecting the Henry Hub spot price to average $3.95 per thousand cubic feet his year and $4.62 in 2010.
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