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Worldwide crude oil and natural gas prices up in May Petroleum News Anchorage Staff
The Energy Information Administration said in its short term forecast issued June 6 that average worldwide crude oil prices rose in May as continued reports of low oil inventories trumped expectations that Iraqi oil production would quickly return to pre-war levels. Those hopes faded on the news that post-war looting would postpone for some months the return of the Iraqi oil sector to normal operations, the agency said.
In addition, a terrorist attack in Saudi Arabia and estimates of lower production in Saudi Arabia by some analysts combined to push prices upward. By early June, EIA said, the Organization of Petroleum Exporting Countries basket price had risen to its highest level in two months, and is now in the upper end of OPEC’s target range of $22-$28 per barrel.
The natural gas spot price at the Henry Hub has remained well above $5 per million British thermal units on a monthly basis since the beginning of the year and is above $6 per million Btu in the first week of June. The agency said the low level of underground storage is the principal reason for these unseasonably high prices and predicted that natural gas prices will likely remain high as long as above-normal storage injection demand competes with industrial and power sector demand for natural gas. Above average prices, strong drilling needed Above average prices and strong gas-directed drilling efforts this year will be needed to ensure that gas in storage reaches at least minimally adequate levels by the beginning of the next heating season, the agency said. If adverse weather intervenes, the task could be made more difficult and even place additional upward pressure on prices.
Assuming normal weather, spot prices in the $5.50-$6 per million Btu range are expected for the rest of 2003.
Commenting on the forecast, Energy Secretary Spencer Abraham said June 6 that the agency “has again noted that the nation’s stocks of natural gas in underground storage are unusually low due to weather factors and declines in both domestic production and net imports.” He said industry is increasing storage rates, “marked this week by a record storage injection,” but he noted that hot summer weather could “exacerbate the problem.”
Abraham said he asked the National Petroleum Council to study U.S. natural gas, and has now called for a special meeting of the council June 26 because, “in my view, we cannot wait to take action on the problem.”
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