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EIA projects $95 WTI 2nd half of year Agency says dropping crude prices from May to early June reflect concerns about world economic conditions and oil demand growth Kristen Nelson Petroleum News
West Texas Intermediate crude oil spot prices fell from $106 per barrel May 1 to $83 per barrel June 1, “reflecting market concerns about world economic and oil demand growth,” the Department of Energy’s Energy Information Administration said June 12 in its latest Short-Term Energy Outlook.
EIA said it is now projecting WTI to average $95 per barrel in the second half of the year, a drop of almost $11 a barrel from the agency’s May forecast. The U.S. refiner acquisition cost of crude oil is projected to average $100 per barrel in the second half of the year, a similar drop from EIA’s May forecast.
The agency said it expects oil prices to remain relatively flat next year. The forecasts are based on a 2.2 percent growth in U.S. real gross domestic product this year and a 2.4 percent growth next year, and on world oil-consumption-weighted real GDP growth of 3.1 percent this year and 3.5 percent next year.
“The recent economic and financial news that points towards weaker economic outlooks could lead to lower economic growth forecasts and further downward revision of EIA’s crude oil price forecasts,” the agency said.
EIA said WTI is expected to average $97 per barrel this year and $102 per barrel in 2013, about $7 per barrel lower than the May forecast.
Markets loosening EIA said global oil markets have loosened in recent months, with production outpacing consumption by 700,000 barrels per day in the first quarter, forecast to grow to 1.2 million bpd in the second quarter. The agency said its economic growth assumptions are unchanged from last month, but its crude oil price forecast was lowered because of increased current and forecasted supply, primarily from countries outside the Organization of the Petroleum Exporting Countries, OPEC, “and to reflect changes in the relative strength of the upside and downside risks buffeting oil markets.”
Non-OPEC production is expected to rise by 800,000 bpd this year and a further 1.2 million bpd in 2013, with North America the largest area of non-OPEC production growth with production increases of 890,000 bpd expected this year and 470,000 bpd next year, “resulting from continued production growth from U.S. onshore shale and other tight oil formations and Canadian oil sands,” EIA said.
Production from Brazil is expected to increase by 20,000 bpd this year and by 120,000 bpd in 2013, and Kazakhstan is expected to increase its production by 160,000 bpd next year, with commercial production beginning from the Kashagan field.
China, Russia and Colombia are also expected to have production increases over the next two years, while production declines are expected in Mexico and the North Sea.
OPEC members are expected to produce more than 30 million bpd over the next two years to accommodate expected increases in demand and to counterbalance supply disruptions, EIA said, with an expected increase of 900,000 bpd this year followed by a decrease of 500,000 bpd in 2013, “as non-OPEC supply growth increases and stocks remain flat.”
EIA said OPEC members are the world’s swing producers because only they have surplus or spare oil production capacity, capacity expected to average 2.5 million bpd this year and 3.4 million bpd next year.
U.S. imports down U.S. crude oil production increased by an estimated 200,000 bpd to 5.67 million bpd last year and is forecast to average 6.32 million bpd this year, EIA said, an upward revision of 150,000 bpd from the agency’s May forecast, “and the highest annual level of production since 1997.”
Lower 48 onshore production is expected to grow by 660,000 bpd this year, Gulf of Mexico production to stabilize after falling last year, but Alaska output is projected to continue to decline by 30,000 bpd.
Crude oil output for 2013 is expected to rise a further 400,000 bpd, most of that from increases in Lower 48 onshore production, “driven by increased oil-directed drilling activity, particularly in onshore tight oil formations,” EIA said.
The agency said Baker Hughes reported 1,386 onshore oil-directed drilling rigs on June 1, up from 777 at the beginning of 2011.
The share of U.S. consumption met by crude oil and product imports has been falling since it peaked at more than 60 percent in 2005, EIA said. It averaged 45 percent in 2011, down from 49 percent in 2010 and the agency said it “expects that the total net import share of consumption will continue to decline to 42 percent in 2012 and to 40 percent in 2013 as a result of the substantial increases in domestic crude oil production.”
Natural gas use up EIA said natural gas consumption in the U.S. is expected to average 69.5 billion cubic feet per day this year, up 2.7 bcf per day (4.1 percent) from last year — and an increase of 0.7 bcf per day from the agency’s May forecast.
Total U.S. marketed production of natural gas grew by 4.8 bcf per day last year, “driven in large part by increases in shale gas production,” the agency said. Production is expected to grow this year, but at a slower rate than last year, “as low prices reduce new drilling plans.” EIA said Baker Hughes is reporting a natural gas rig count of 588 on June 1, down from a 2011 high of 936 in mid-October, the lowest gas rig count since 1999.
Domestic natural gas prices averaged $2.43 per million Btu at Henry Hub in May, up 48 cents from April, the first average monthly increase price in almost a year, EIA said.
“Despite the increases, prices remain at historically low levels; the May 2012 price averaged 44 percent less than the May 2011 price,” EIA said, crediting abundant supplies and a warm winter as contributing to current low prices.
The agency expects the Henry Hub price to average $2.55 per million Btu this year, a small upward revision from $2.45 in May’s forecast. The 2013 forecast has been revised to $3.23 per million Btu, up from $3.17 in May.
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