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Oil around $30 for two years, economists figure
Allen Baker Petroleum News Contributing Writer
Federal economists expect crude prices to hold near $30 a barrel through the end of 2005, according to a report from the Energy Information Administration. Prices for West Texas Intermediate crude topped $34 a barrel in January, up more than $2 from the December average.
The Feb. 10 report didn’t factor in the decision by the Organization of Petroleum Exporting Countries to cut its production quota by a million barrels a day on April 1 from the current 24.5 million, and try to rein in cheating by member nations that has resulted in production of about 1.5 million barrels above the target. Should both measures prove effective, OPEC’s output would decline by about 9 percent. OPEC produces about a third of the world’s oil. Inventories already are low, according to the EIA report. Pump prices rise Meanwhile, the higher crude costs in January pushed pump prices for gasoline to $1.57 a gallon in January, up from $1.48 a gallon in December. The agency predicts gasoline prices for 2004 will average $1.57, just a penny higher than the 2003 figure. Spring and summer prices are expected to be around $1.61, up a nickel from last year’s average for those months. But inventories are tight, and refineries are dealing with new regulations that require lower sulfur levels and other reformulations, so any refinery outages could produce local spikes. The new rules also could reduce imports of gasoline from South America and Europe.
For the longer term, the EIA expects world oil demand to rise by 3.1 million barrels a day in 2005, compared with the 2003 average. Non-OPEC supply is expected to grow by only 2.5 million barrels daily; however, giving the cartel added leverage. U.S. demand will rise by nearly a million barrels daily over that period, to 20.9 million barrels, up from just under 20 million barrels in 2003. Natural gas steady Despite colder than normal U.S. weather in December and early January, natural gas prices are heading down on the strength of storage levels that have remained slightly above normal. Spot prices in early February slid toward $5 per million Btu, after averaging $5.90 in the month of January. The EIA estimates that U.S demand for natural gas dropped 3.7 percent in 2003 due to higher prices, which cut demand from electric and industrial customers.
But prices are expected to trend a bit lower, and that will boost demand by 2.2 percent this year, compared with 2003. Natural gas prices are expected to average $4.90 per million Btu for this year, and near $5 in 2005, when the agency predicts demand will grow an additional 1.1 percent.
Production increased 2.1 percent in 2003, according to early estimates, and gas production is expected to expand modestly through 2005, with natural gas well completions reaching somewhere between 21,000 and 22,000 wells per year over the next two years. That’s up from an estimated 20,000 last year.
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