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Crude oil price up; natural gas price down EIA projects WTI at $106 per barrel, up $11 from 2011; Henry Hub spot gas price lowest since February 2002 Kristen Nelson Petroleum News
The U.S. Energy Information Administration said March 6 in its Short-Term Energy Outlook that it expects West Texas Intermediate crude oil to average $106 per barrel this year, $5 higher than the agency’s February projection, and $11 higher than the 2011 average price.
EIA said it expects WTI prices to remain relatively flat in 2013, averaging $106 per barrel. There is currently a WTI price discount to average U.S. refiner acquisition cost because of pipeline capacity constraints out of the midcontinent. This discount is expected to narrow over 2012 from about $10 per barrel in the second quarter to about $4 per barrel by the fourth quarter, as those physical pipeline capacity constraints diminish, the agency said.
The agency said prices could rise if current supply disruptions intensity and drop if the pace of economic growth fails to recover in the developed world.
U.S. natural gas spot prices averaged $2.50 per million Btu at Henry Hub in February, down 17 cents from the January average and the lowest monthly price since February 2002, EIA said.
“Abundant storage levels, as well as ample production, have contributed to the recent low prices,” the agency said.
The Henry Hub spot price is expected to recover and to average $3.17 per million Btu this year and $3.96 in 2013.
Record high inventories Warm weather this winter has resulted in new record seasonal highs for natural gas working inventories, EIA said, with an estimated 2.44 trillion cubic feet in storage at the end of February, some 41 percent above the same time last year.
U.S. natural gas consumption is expected to average 68.9 billion cubic feet per day this year, an increase of 2.1 bcf from 2011.
Total marketed production of natural gas in the U.S. grew by an estimated 4.8 bcf per day last year, “the largest year-over-year volumetric increase in history,” EIA said.
The strong growth was largely driven by shale gas production, and the agency said it expects year-over-year production growth to continue in 2012 and 2013, but at a lower rate than in 2011 as low prices reduce drilling plans.
The agency said Baker Hughes showed a natural gas rig count of 691 as of March 2, down from a 2011 high of 936 gas rigs working in mid-October.
“So far, the lower rig count has not impacted production levels, partly reflecting improved drilling efficiency,” EIA said, but fewer horizontal wells particularly in the Haynesville Shale, are expected to contribute to short-term production declines through June.
Crude oil consumption growing EIA said it expects crude oil consumption to outpace production in countries outside the Organization of the Petroleum Exporting Countries, with world liquid fuels consumption growing by an average of 1.1 million barrels per day this year, and supply from non-OPEC countries increasing by 0.7 million bpd.
The agency said it expects the market will rely on inventories and increases in crude oil and non-crude liquids production from OPEC to meet the demand.
The largest expected area of supply growth outside OPEC will be North America, with production projected to grow by 360,000 bpd this year and 190,000 bpd in 2013, “resulting from continued production growth from U.S. onshore shale formations and Canadian oil sands.”
OPEC production is expected to continue to rise over the next two years.
OPEC nations serve as swing producers in the world market, EIA said, because only OPEC members have surplus production capacity, currently 2.4 million bpd, but expected to grow to 3.7 million bpd per day by the end of 2013 as Libyan production capacity recovers to pre-disruption levels.
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