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EIA predicts continued high oil prices, ‘near current levels’ through ’05
Petroleum News
The U.S. Department of Energy’s Energy Information Administration said July 7 that it now expects to see oil prices in the $37 a barrel range through the third quarter of the year, and prices in the high $30s through the end of next year.
The agency said that while U.S. spot prices for West Texas Intermediate are down from highs above $40 a barrel, they continue to fluctuate in the upper $30s “despite general improvement in crude oil inventories and increases in output by key OPEC producers, including Saudi Arabia.” Excluding Iraq, Organization of Petroleum Exporting Countries crude oil production in June was 27.1 million barrels per day, 800,000 bpd higher than May levels, and only about 1 million bpd below capacity.
Inventories in both the United States and the rest of the industrialized world remain below normal, “particularly when seen in the context of rapidly increasing global oil demand.” Oil demand growth at 2.6 percent The agency said it expects growth in global oil demand “in excess of 2 million barrels per day” or about 2.6 percent in 2004 and 2005, which “is likely to keep spot crude prices near current levels through next year.” It had projected a “gradual, sustained decline in crude oil prices through 2005,” the agency said, but now believes chances for that price decline “have diminished.”
Its projected average price for West Texas Intermediate for the third quarter is now $37 per barrel, about $1 per barrel higher than previously projected. “Currently low world oil surplus capacity levels provide an extremely limited cushion in the event of unexpected world oil market disruptions,” the agency said.
While there is “significant uncertainty” in demand and supply, “numerous concerns about potential oil supply difficulties remain,” the agency said, including concerns around Iraq, threats to other Middle East producing assets, questions about Venezuela output capacity “and the capability of Russia to main steady supply increases going forward.”
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