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EIA increases WTI crude forecast price Non-OECD oil demand growth to more than offset slowing OECD consumption; first growth in oil consumption in 5 quarters expected Petroleum News
The Department of Energy’s Energy Information Administration is forecasting an increase for the price of West Texas Intermediate crude oil — up $7 per barrel compared with the EIA’s October outlook.
In its current short-term energy outlook, released Nov. 10, EIA said it expects WTI to average $77 per barrel this winter (October through March), and to reach $81 per barrel by December 2010, assuming economic conditions continue to improve.
EIA said it is forecasting U.S. real gross domestic product to grow by 1.9 percent in 2010 and world oil-consumption-weighted real GDP to grow by 2.6 percent.
The monthly Henry Hub natural gas spot price is projected to average $4.22 per thousand cubic feet in November, down more than $2.60 per thousand cubic feet from the November 2008 price. Natural gas inventories on Oct. 31, the end of the injection season, were some 3.8 trillion cubic feet, a record level for this time of year, EIA said.
A growing economy combined with an expected decrease in natural gas production should increase the annual average Henry Hub spot price from $4.03 this year to $5.01 in 2010.
Global crude oil EIA said it is revising its expectations for world oil consumption upward for the second consecutive month, based on sustained economic growth in China and other Asian countries which is contributing to the beginnings of a rebound in oil consumption.
The agency now expects consumption growth to increase by 150,000 barrels per day in 2009 and 2010, compared with its October outlook.
Organization for Economic Cooperation and Development oil inventories remain high, but optimism for a continued economic turnaround combined with the impact of Organization of the Petroleum Exporting Countries’ production cuts have driven oil prices higher.
EIA said that if the economic recovery stalls and oil consumption does not rebound, oil prices could weaken given high inventory levels.
The agency said that while it expects OECD oil consumption to decline in the fourth quarter, “oil demand growth in the non-OECD countries during this period is expected to more than offset these losses, leading to the first growth in global oil consumption in five quarters.”
Prices up 8 percent WTI oil futures prices for the December contract averaged $76 per barrel in October on the New York Mercantile Exchange, almost $6 per barrel above the prior month’s contract, an increase of more than 8 percent for the month, “with expectations of an economic recovery and higher oil consumption offsetting concerns about current high oil inventories.”
EIA said price volatility in crude oil markets has declined since the October forecast, “indicating the markets were slightly more comfortable with news of an economic turnaround led by Asia.”
For the five days ending Nov. 5, the January 2010 WTI futures contract prices averaged just under $80 per barrel, EIA said, “and the implied volatility for options on that contract averaged just over 41 percent, down more than 7 percentage points from the 49 percent level prevailing the month prior.”
Natural gas consumption down U.S. natural gas consumption is projected to decline by 1.9 percent in 2009 to 62.2 billion cubic feet per day, and by another 1.1 percent in 2010, EIA said.
The economic downturn led to a drop in total natural gas consumption this year, but low prices contributed to a 2 percent increase in natural gas use in the electric sector from January through August, compared with the same period in 2008.
EIA said it expects total U.S. marketed natural gas production to increase by 2.8 percent this year and decline by 3.8 percent in 2010.
Working natural gas rigs have declined by more than 54 percent since cresting at 1,600 late in August 2008, but marketed natural gas production in the Lower 48 nonfederal Gulf of Mexico has only declined 0.6 percent between January and August, and the natural gas rig count is on the rise again after bottoming out in mid-July.
EIA said it expects reduced drilling rates and steeper decline rates from new wells brought online in 2009 will lead to lower production levels next year.
Working natural gas in storage was 3.788 trillion cubic feet on Oct. 30, 414 bcf above the five-year average, 379 bcf above the level during the corresponding week in 2008 and 223 bcf above the previous record of 3.565 tcf reported in 2007.
The Henry Hub spot price averaged $4.12 per thousand cubic feet in October, up $1.06 from the average September spot price. EIA said that smaller-than-expected weekly storage injections, due to colder weather in the Midwest and pipeline maintenance, contributed to stronger prices in October.
Prices have more than doubled since Sept. 4 when they reached a low of $1.83 per thousand cubic feet, but EIA said it expects any further price run-up to be limited for the rest of the year based on high storage levels and resilient domestic production.
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