U.S. gas supply "underwhelmed," EIA finds in early September

The Department of Energy’s information division expects the West Texas Intermediate oil price to average about $28 per barrel in 2001 and slightly less than $27 per barrel in 2002

Petroleum News Alaska

The U.S. Department of Energy’s Energy Information Administration said Sept. 6 that approximately 2,603 billion cubic feet of natural gas were in storage at the end of August, 19 percent above levels a year ago and 7.6 percent above the previous five-year average.

The EIA said U.S. natural gas supplies have been “underwhelmed” on the demand side since the end of the last heating season by the U.S. economic slowdown and the lack of a sustained and broad-based boost in fuel use from summer electricity demand.

Spot natural gas prices at the Henry Hub fell below $2.50 per million Btu at the end of August, and the EIA said prospects for average prices well below $3 in 2002 have “improved greatly” because normal weather conditions and a modest recovery in industrial output are not expected to generate much in the way of new upward pressure on gas prices through 2002.

Production capability sufficient

Crude moves up $1 in August

The EIA said there have been downward revisions in OECD oil stock estimates, providing “some reinforcement for our general view that crude markets are likely to tighten some before the end of the year…”

Total oil stocks are likely to show a decline in the United States in the third quarter, the EIA said, noting it “had previously projected a more normal-looking slight increase for the June to September period.”

OPEC cutback scheduled for September will probably help bring an average crude oil price increase of about $1.50 per barrel by the fourth quarter and the loss of United Nations sanctioned Iraqi exports in June and further OPEC production quota cuts effective Sept. 1 are expected to further reduce OECD commercial oil inventories over the next few months, the agency said.

The EIA said it now expects the West Texas Intermediate oil price to average about $28 per barrel in 2001 and slightly less than $27 per barrel in 2002.

EIA’s Sept. 12 oil market assessment

Petroleum News Alaska

Rumors of scattered closures of U.S. refineries, pipelines, and terminals were reported, and Louisiana Offshore Oil Port operations were partially suspended. Most, if not all petroleum industry infrastructure was expected to (and did) resume normal operations on Sept. 12 or in the very near term.

“Prices at all levels (where markets were open) posted increases yesterday, but many prices fell today, as initial reactions subside,” EIA said Sept. 12

The terrorist attacks occurred against a background of “already tight crude oil and product markets in the United State and worldwide. Even prior to yesterday’s events, global oil markets were expected to continue tightening through December, with WTI rising to the $28 to $29 level as the supply surplus from earlier this year continues to erode,” EIA said.

“Any event (such as continued draws, outages, weather, or Mideast tensions) could act as a catalyst to alert markets to the potential for very tight supplies this winter, and oil prices could swing upward,” EIA said.