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EIA lowers 2009-10 crude price forecast
Petroleum News
West Texas Intermediate averaged $100 per barrel in 2008. The price is expected to average less than half of that in 2009, as the global economic contraction continues to depress energy demand, the U.S. Department of Energy’s Energy Information Administration said March 10.
EIA is now projecting a WTI average of $42 per barrel this year and $53 in 2010 — both averages down from last month’s forecast, the agency said in its short-term outlook.
The U.S. economic downturn “is the principal cause for the decline in domestic natural gas consumption, particularly in the industrial sector — where it is projected to fall by 6 percent in 2009,” leading to projected lower natural gas prices. EIA said the Henry Hub natural gas spot price is projected to decline from an average of $9.13 per thousand cubic feet in 2008 to some $4.70 per mcf in 2009, increasing to an average of almost $5.90 in 2010.
Relative stability The global oil market has been relatively stable since the beginning of 2009, EIA said, a situation which the agency expects to continue through most of the year, “until economic recovery in the United States and elsewhere leads to a rebound in oil demand growth.”
EIA said if economic growth rebounds sooner than expected in its modeling, there could be stronger-than-expected growth, outpacing production, resulting in rising prices.
But upward movement in oil prices “will be muted by the relatively high levels of commercial inventories” in countries which are members of the Organization for Economic Cooperation and Development, along with surplus production capacity in members of the Organization of Petroleum Exporting Countries.
EIA expects annual world oil consumption to drop by almost 1.4 million barrels per day this year, a 200,000-bpd larger decline in world consumption than the agency projected last month and down 3 million bpd from its September 2008 forecast.
Non-OPEC supply is expected to remain flat over the next two years, following a 300,000-bpd decline last year.
OPEC is reported to have trimmed production significantly over the past several months, down an estimated 1.1 million bpd in the fourth quarter of last year, to 30.6 million bpd. An OPEC production decline of an additional 2 million bpd is expected in the first quarter of this year, down to 28.6 million bpd, the lowest first-quarter level since 2003.
EIA expects that OPEC will have surplus production capacity averaging 4 million to 5 million bpd over the next two years, which should reduce the likelihood of sharp price increases.
“There remains a risk, however, that financial constraints and prospects of weak demand could lead OPEC members to further delay expansion programs, reducing future surplus capacity and setting the stage for higher prices once the economic recovery is under way,” the agency said.
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