|
EIA revises upward estimates for winter heating bills Agency says high natural gas prices expected to continue through 2001 Petroleum News Alaska
The U.S. Department of Energy’s Energy Information Administration, noting that energy prices have continued to move higher this fall, said in early December that it has substantially revised upward its estimates of consumer heating bills for the 2000-2001 heating season.
Oil prices have not shown much of the anticipated declines relating to estimated excess production over demand rates, the agency said.
“The recent downturn in oil prices may be a temporary perturbation within the typical uncertainty bounds that could be reversed if no solid evidence of increased supplies materializes.”
Meanwhile, natural gas spot prices soared to record average levels in November, the EIA said, after a taste of winter weather arrived in major heating demand areas, with significant gas supply constraints on the West Coast producing “sky-high” prices there.
On the East Coast, extraordinarily low heating oil inventories put markets at risk of sharp price spikes if more cold weather moves in.
Based on all of these factors, the agency said, it has “substantially revised upward” its estimates of this winter’s consumer heating bills. Actual stockpiles languish The EIA said oil price movements and indicators of supply conditions in key markets “put in doubt the timing, if not the significance, of presumed oil market ‘rebalancing’ toward lower oil price ranges.”
The agency said there is an “annoying reality of languishing actual stockpiles amidst claims of large aggregate excess production.”
The agency expects prices to decline by mid or late 2001 as new supply increases exceed incremental demand.
“Recent downward crude oil price movements could signal an earlier rather than later correction,” the agency said.
West Texas Intermediate crude is expected to remain near or above $30 a barrel “perhaps as long as through the middle of 2001.”
“Despite high production rates, an infusion of SPR oil and the possibility for a rebound related to early shipments of product to distributors and end users in earlier months, U.S. commercial distillate stocks eked out only a 2-million-barrels increase last month. Even in a normal year the November stock build is larger than that.”
Because the U.S. distillate markets remain vulnerable “to upward price shocks under cold conditions” the EIA said it expectations for heating oil prices have been adjusted upward, “with the winter average price now expected to be about 29 percent above the year-earlier average.”
Combined with higher consumption rates expected for this winter, the EIA said typical heating oil bills may be more than a third higher than last winter’s. Gas price expected to stay high The EIA said low stocks, high heating demand this winter and significant increases in natural gas demand from new gas generating plants next year will probably prolong high natural gas prices through 2001, “even if a decent turnaround in U.S. and Canadian production materializes for 2001…”
Winter residential prices are expected to average about $9.21 per thousand cubic feet compared to $6.56 per thousand cubic feet last winter, a 40 percent increase, which, combined with expected increase in consumption rates, “implies an expected increase in typical gas-heated household heating bills this winter of around 50 percent.”
The EIA said it expects that “high and volatile gas prices will prevail until solid evidence that the gas supply situation is easing.”
| 