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EIA drops WTI projected 4Q average to $49 per barrel Agency expects price to remain in mid-$40s through 2005 based on low inventories, limited prospects for large production increases outside of OPEC Petroleum News
The U.S. Department of Energy’s Energy Information Administration said Dec. 7 that it has lowered its projected fourth quarter average for West Texas Intermediate spot prices after “WTI prices eased sharply in November.”
U.S. spot prices for WTI crude oil have ranged from more than $50 per barrel to about $43 per barrel during the last three weeks, the agency said Dec. 7 in its short-term forecast.
The agency said it has lowered its projected average WTI price for the fourth quarter to $49 per barrel, about $18 per barrel higher than in the fourth quarter of 2003, but nearly $2 per barrel below the agency’s November projection.
On the supply side, some 500,000 barrels per day of Gulf of Mexico oil output was shut in due to Hurricane Ivan in early October, but the Minerals Management Service reported less than 200,000 bpd shut in at the end of November, the EIA said.
The agency also said that world petroleum demand growth for 2004 “has been revised downwards slightly” to 2.6 million bpd above 2003 levels, still “strong 3.3 percent growth for the year.” Global oil demand is expected to slow to 2 million bpd, a 2.5 percent growth rate, in 2005 “as global economic growth slows toward more sustainable rates, influenced in part by high world oil prices.”
Chinese oil demand growth is also expected to moderate from its 2004 rate, “which reflected a dramatic increase in demand for oil-generated power that is not likely to be repeated,” the agency said. Near-term price expected to remain in mid-$40s The agency said because strong oil demand growth in 2004 is expected to continue into 2005, inventories in industrialized countries remain relatively low. The lower inventories, and limited prospects for large oil production increases outside OPEC in the near term, “suggest that oil prices will remain in the mid-$40s range through 2005, even though OPEC crude oil production remains high at about 30 million barrels per day.”
Production capacity remains at about 500,000 to 1 million barrels per day “above current output levels, implying a global utilization rate of about 99 percent,” the agency said.
The United States is expected to see an increase in oil production in 2005 of about 160,000 barrels per day, “something that has not happened on an annual basis since 1991,” the agency said. The increase is partly due to continued recovery from Hurricane Ivan, but also to rising production in federal U.S. Gulf of Mexico waters. Henry Hub to average $6.03 per mcf in 2004 The agency said Henry Hub prices are expected to average $6.03 per mcf in 2004, up from $5.64 in 2003, and to hold level at about $6.01 per mcf in 2005. “These prices are lower than last month due to continued high natural gas inventories.” Working gas in storage is estimated to have reached 3.280 trillion cubic feet at the end of November, the agency said, 8 percent higher than a year ago and 11 percent higher than the five-year average.
The average Henry Hub natural gas spot price was $5.15 per mcf in September and $6.54 per mcf in October, but as Gulf of Mexico production recovered and November weather remained mild, spot prices dropped below $5 per mcf Nov. 19. With peak winter weather closing in, the agency said, natural gas prices are expected to rise over the next several months.
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