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EIA expects refiner crude cost of $100 Agency’s August short-term outlook based on global spare production capacity, assumes US GDP growth of 2.4%, 2.6% this year, next Kristen Nelson Petroleum News
Based on U.S. real gross domestic product growth of 2.4 percent this year and a continued decline in global spare production capacity, the U.S. Energy Information Administration estimates that the refiner acquisition cost of crude oil in the U.S. will average $100 per barrel this year and, with 2.6 percent GDP growth in 2012, $107 per barrel next year.
In its Aug. 9 short-term energy outlook EIA said its “assumptions do not fully reflect recent economic and financial developments that point towards a weaker economic outlook and also contributed to a sharp drop in world crude oil prices during the first week of August.”
The agency said there “is a significant downside risk for oil prices if economic and financial market concerns become more widespread or take hold.”
Supply disruptions an issue EIA said global oil demand growth, led by China, is expected to outpace growth in supplies outside the Organization of the Petroleum Exporting Countries. As a result, markets will rely on drawdown of inventories and OPEC production increases, but the agency said OPEC countries are not expected to increase production markedly in the short term.
Major upside risks in the crude oil price outlook include additional supply disruptions in producing regions and higher-than-expected demand growth, particularly in countries outside the Organization for Economic Cooperation and Development. EIA said downside risks include rate of global economic recovery and fiscal issues facing national and sub-national governments.
Non-OPEC supply is expected to increase by an average of 650,000 barrels per day of crude oil and liquid fuels, with the greatest increasing in Brazil, Canada, China, Columbia, Kazakhstan and the United States, each averaging growth of more than 100,000 bpd. Production declines are expected in the North Sea of 140,000 bpd, particularly in the United Kingdom, and declines in Yemen of 140,000 bpd based on ongoing strife.
Spot prices down West Texas Intermediate crude oil spot prices fell from an average of $110 per barrel in April to $97 per barrel in July, EIA said, with world crude oil prices falling by about $10 per barrel in the first week of August, “reflecting market concerns about world economic and oil demand growth.”
The agency said it expects oil markets to tighten as the demand for liquid fuels grows in emerging economies, continuing to outpace supply growth and putting upward pressure on oil prices.
EIA said it expects WTI to average $96 per barrel this year and $101 per barrel in 2012, up from $79 last year.
Gas consumption grows Natural gas consumption rose with the extremely hot weather in most of the nation in July, with U.S. population-weighted cooling-degree days 27 percent higher than the 30-year norm and 8 percent higher than last year, contributing to an increase in natural gas use for electricity generation compared with July 2010.
EIA said it expects that total U.S. natural gas consumption will grow by 1.8 percent to 67.4 billion cubic feet per day this year, with forecast industrial and electric power consumption growth making up most of the increase.
U.S. marketed natural gas production is expected to average 65.5 bcf per day this year, a 3.7 bcf per day (5.9 percent) increase over last year, with growth centered in onshore Lower 48 production, which more than offsets projected declines in the outer continental shelf Gulf of Mexico.
Growing domestic natural gas production is reducing reliance on imports, EIA said, and contributing to increased exports.
The Henry Hub spot price averaged $4.42 per million Btu in July, 13 cents lower than the June average. EIA said it expects the Henry Hub price will average $4.24 per million Btu this year and $4.41 in 2012, reflecting some tightening in supply as domestic production growth slows.
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