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World crude oil demand, prices expected to rise later this year
Tracy Wilson
Crude oil prices are likely to remain at a standstill this summer, but world demand and prices will then begin rising as oil inventories decline, according to the June 8 short-term energy outlook report released by the U.S. Department of Energy’s Energy Information Administration.
The EIA said it wasn’t inclined to change its forecast because demand and supply changes will probably prevent even a normal seasonal increase in world oil inventories in 1999.
“Recent data indicate that, if anything, we have been underestimating oil prices slightly,” EIA said. “As a result we have raised the projected level of our benchmark price (cost of imported oil to U.S. refiners) by a small amount.”
Prices are likely to rise through 2000 as world oil inventories decline. By the end of 2000, prices are expected to be about $17.25 per barrel. World oil demand expected to rally EIA estimates world oil demand will grow by about 1.1 million barrels per day in 1999, and another 1.6 million barrels per day in 2000.
The forecast assumes Asian oil demand this year will recover from its slowdown in 1998.
According to EIA, OPEC compliance with three previous agreements — one on March 23 and two others reached in 1998 — will peak at about 75 percent of the total 4.3 million barrels per day of agreed OPEC cuts, before declining toward the later half of 1999 as higher prices increase the incentive for countries to increase production.
Initial estimates of compliance for the first month of the latest agreement range from 65 percent to 85 percent.
Non-OPEC production is expected to remain flat in 1999, but increase in 2000.
EIA projects an average U.S. petroleum demand increase of about 400,000 barrels per day for 1999. In 2000, petroleum demand could climb another 260,000 barrels per day.
EIA hiked its U.S. crude oil production forecast to output levels about 145,000 barrels per day above previous estimate data.
“This, along with our view that prices will remain well above the lows seen last winter and even increase over the forecast period makes for a more optimistic outlook for U.S. production in 1999 and 2000,” EIA said.
Average domestic crude oil production is expected to decrease by 250,000 barrels per day in 1999, to 5.99 million barrels per day — compared to EIA’s previous 370,000-barrels-per-day reduction forecast.
Particular improvement is expected in the offshore Gulf of Mexico area. No investments planned for Prudhoe Bay Alaska is expected to account for 17.25 percent of total U.S. oil production in 2000, with production expected to decrease by 7.60 percent in 1999 and by 6.80 percent in 2000.
A substantial portion of the oil production from Alaska comes from the Prudhoe Bay field.
Other than routine maintenance, no major investments are planned for this field during the forecast period and it is expected to follow a steeper decline during this period.
Oil production from Sambuca and Midnight Sun are expected to partially offset the decline in production from Prudhoe Bay and other North Slope fields in 1999. A large-scale enhanced oil recovery project was initiated in September 1996 in the Kuparuk River field. The field’s production, including production from West Sak, Tabasco and Tarn, is expected to stay at an average of 265,500 barrels per day in the 1999-2000 forecast period.
To see details of the forecast update, visit http://www.eia.doe.gov/steo/.
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