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EIA sees $80 per barrel WTI this winter
Petroleum News
The U.S. Department of Energy’s Energy Information Administration is forecasting an $80 per barrel average price for West Texas Intermediate crude oil this winter, up $2.50 per barrel over last winter, with the price expected to rise gradually to $85 per barrel by the fourth quarter of 2011, driven by improving U.S. and global economic conditions.
Natural gas inventories are projected to reach more than 3.7 trillion cubic feet by Oct. 31, the end of this year’s injection season, about 3 percent below last year’s record-setting level, but still the second highest underground storage level on record for October.
EIA forecasts the Henry Hub annual average spot price for natural gas to increase from $3.95 per million Btu in 2009 to $4.47 this year and $4.58 in 2011.
Members of the Organization of the Petroleum Exporting Countries will meet Oct. 14 to discuss market conditions, and EIA said the oil market outlook is “largely unchanged from the previous few months.”
Commercial oil inventories in Organization for Economic Cooperation and Development countries remain high, floating oil storage has been declining, and EIA said it “believes that a gradual projected reduction in OECD oil inventories over the forecast period should support firming oil prices.”
With world oil prices expected to rise gradually as global economic growth leads to higher oil demand and growth in non-OPEC supply slows in 2011, EIA said it expects OPEC production will rise over the forecast period, which will keep oil prices from increasing dramatically.
“Should OPEC not increase production as global consumption recovers, oil prices could be significantly higher than the central forecast,” EIA said, while if the global economic recovery is slower than expected prices could be lower than forecast.
Consumption revised up slightly World oil consumption growth has been revised upward slightly to 1.7 million barrels per day as oil demand growth in China and the OECD has been stronger than expected. Most of the expected growth in world oil demand is from non-OECD regions — particularly China, the Middle East and Brazil.
North America is expected to show oil consumption growth in 2011 of 200,000 bpd; other OECD regions are showing declines.
Projected growth in global oil consumption for 2011 is unchanged from last month at 1.4 million bpd, EIA said.
WTI averaged $75 per barrel in September, but rose above $80 at the end of the month and into October, as expectations of higher consumption pushed up prices. EIA said it raised the average fourth quarter 2010 forecast for WTI spot price to $79 compared to $77 in September. The projected average is $78 per barrel this year and $83 in 2011.
Increase in natural gas consumption EIA said it is projecting that U.S. natural gas consumption will increase by 4.6 percent in 2010 and by 0.1 percent in 2011, with industrial and electric power consumption making up the bulk in the year-over-year increase in 2010. Industrial natural gas consumption is projected to rise 7.4 percent this year; a forecast 7.6 percent increase in electric power sector consumption is due to very warm summer weather, which led to an increase in electricity demand for cooling. Estimated natural gas consumption for electric power through August averaged 20.75 billion cubic feet per day, a 7.9 percent increase over the 19.23 bcf per day average through August last year.
Marketed natural gas production in the Lower 48 is expected to rise by 3.5 percent this year, but EIA said it expects a decrease of 1.5 percent in 2011.
The natural-gas-directed drilling rig count has increased since mid-2009. The count includes a growing share of natural-gas-directed horizontal drilling rigs in the Lower 48, contributing to production growth this year. EIA said the Baker Hughes natural gas rig count increased from 712 on Oct. 2, 2009, to 962 on Oct. 1 this year.
The growing spread between prices for petroleum liquids and natural gas has favored a shift toward drilling in shale formations that contain a higher proportion of liquids, EIA said.
Imports up slightly Gross pipeline imports of natural gas are expected to average 9.2 bcf per day in 2001, an increase of 1.5 percent over 2010. Imports of liquefied natural gas are expected to average 1.23 bcf per day this year, down slightly from 2009 levels.
“Growing domestic production and low U.S. prices relative to European and Asian markets have discouraged LNG imports,” EIA said. Still, it expects imports to grow slightly, to some 1.32 bcf per day next year, a 7 percent increase.
Working natural gas in storage was 3.499 trillion cubic feet on Oct. 1, EIA said, with current inventories 220 bcf above the previous five-year average.
The Henry Hub spot price averaged $3.89 per million Btu in September, 43 cents per million Btu below the average spot price in August. EIA said prices are expected to remain below $4 per million Btu in October, but rise to $4.68 in January as space-heating demand increases.
EIA said it has revised its predictions for natural gas prices downward through 2011, and now expects the price to average $4.16 per million Btu in the last quarter of this year and $4.58 next year, “primarily due to a stronger domestic production forecast.”
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