|
Energy Information Agency forecasts oil will stay in $40 range through 2006
The U.S. Department of Energy’s Energy Information Administration expects the West Texas Intermediate price of crude oil to remain in the low- to mid-$40 range through 2006, the agency said in its February short-term energy outlook, issued Feb. 8.
WTI is expected to average $46.70 for the first quarter of 2005, up some $11 per barrel from the first quarter of 2004, and, the agency said, $3 per barrel above its January short-term forecast.
EIA said it expects oil prices to be sensitive to “any incremental supply tightness” and said “real or perceived” imbalances in supply and demand in light product markets could cause the price of light crude oils, such as WTI, to increase above the mid-$40s.
While the Organization of Petroleum Exporting Countries agreed Jan. 30 to maintain production levels through the first quarter, “high levels of OPEC production in recent months have contributed to inventory builds in the Organization for Economic Cooperation and Development countries,” and U.S. oil inventories and inventories in other industrialized countries, which were relatively low in early 2004 compared to historical standards, rose above the middle of the five-year range, EIA said.
OPEC will reconsider market conditions March 16; non-OPEC supply growth is expected to average 1.1 million barrels per day in 2005-06.
EIA expects world petroleum demand growth for 2005-06 to average 2.4 percent per year, approximately 2 million bpd, a level exceeding expected non-OPEC supply and global refinery capacity growth. This growth rate is down from the 3.4 percent demand growth in 2004, a drop EIA attributes to high world oil prices and slower projected growth in Chinese oil demand. Natural gas prices expected to ease EIA said Henry Hub natural gas spot prices averaged $6.78 per thousand cubic feet in December and then dropped to $6.32 per mcf in January as unusually mild early winter weather in the Northeast in December reduced heating demand, lowering January spot prices.
Working gas storage at the end of January was estimated at 2.021 trillion cubic feet, 15 percent higher than a year ago and 17 percent higher than the five-year average. EIA said the heating season is now about two-thirds over and with ample storage, “natural gas prices are likely to ease over the next several months.”
With crude oil prices expected to remain more than $40 a barrel through 2006, and a relatively tight natural gas supply/demand situation, EIA expects Henry Hub prices to average $5.45 to $5.75 per mcf annually for 2005-06.
Natural gas demand is projected to increase by 3 percent in 2005 in response to continued economic growth, and domestic natural gas production is projected to increase by 1.6 percent from 2004 levels, due to high gas-directed drilling rates and continued recovery in the Gulf of Mexico from the effects of Hurricane Ivan.
The supply picture for 2005 is expected to improve moderately because of steady increase in liquefied natural gas imports, restrained export growth and carryover from robust storage levels.
—Petroleum News
| 