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EIA says WTI will stay in $42-$43 range through ’06 Henry Hub gas prices expected to average $5.77 per mcf in 2005 with above-average amount in storage, rise to $5.95 per mcf in ’06 as supply tightens Petroleum News
The U.S. Department of Energy’s Energy Information Administration said Jan. 11 that its projected average West Texas Intermediate oil price for the first quarter of 2005 is about $43 per barrel, a drop of $3 a barrel from its previous forecast, but still some $8 per barrel higher than the first quarter of 2004.
“WTI prices fell by $10 per barrel on average during the past two months due to: the ongoing restoration of oil production in the Gulf of Mexico shut in due to Hurricane Ivan, unseasonably warm weather in the United States, and rising U.S. and OECD commercial oil inventories in general,” the agency said.
It now believes WTI prices will stay in the $42-$43 per barrel range through the end of 2006.
The Alaska Department of Revenue estimated a WTI price of $46.30 for fiscal year 2005 (July 2004 through June 2005) and a WTI price of $36.60 for fiscal year 2006 (July 2005 through June 2006) in its fall forecast and estimated $43.61 per barrel for Alaska North Slope crude on the West Coast for fiscal year 2005 and $34.50 per barrel for fiscal year 2006. Demand growth down World petroleum demand growth, which averaged 2.6 million barrels per day in 2004, is expected to average 2.1 million barrels in 2005-2006, as global economic growth settles “at more sustainable rates over the next two years, tempered in part by high world oil prices.” Chinese oil demand is also expected “to moderate from the very high rate seen in 2004,” which reflected a “dramatic increase” in that country’s demand for oil-generated power.
Oil demand is expected to remain strong in 2005-2006, the agency said, so oil inventories in the United States and other industrialized nations are not expected to grow much from levels at the end of 2004, although record levels of Organization of Petroleum Exporting Countries’ production “have finally resulted in inventory builds in the OECD countries,” where commercial inventories are now above the middle of a five-year historic average.
World production capacity rose by a half million barrels per day to 1.1 million to 1.6 million barrels per day above current output levels “as Saudi Arabia de-mothballed capacity at several fields,” the agency said. Global capacity utilization remains near 99 percent.
The agency expects global oil demand growth to be close to 2 million bpd in 2005, down from 2.6 million bpd in 2004, but enough to keep markets tight because it “exceeds expected growth in non-OPEC supply and downstream refinery capacity.” The agency said some analysts expect oil demand growth to drop to 1.5 million bpd in 2005, in which case there would be a greater likelihood that oil markets would loosen up and “prices could ease in 2005.” Gas prices likely to ease The agency said the natural gas price at Henry Hub “fell sharply from $7.35 per mcf to $5.70 per mcf” between Dec. 20 and Jan. 3, reflecting mild weather in the Northeast.
The working gas in storage, 2.7 trillion cubic feet at the end of December, is 5 percent higher than one year ago and 12 percent above the five-year average.
“With the heating season now more than half over and ample storage, natural gas prices are likely to ease over the next several months,” the agency said. It expects Henry Hub prices to average $5.77 per mcf in 2005, and $5.95 per mcf in 2006, “as the supply of natural gas is expected to tighten.”
Natural gas demand is expected to increase by 3 percent in 2005 in response to continued economic growth, with a 1.7 percent increase in natural gas production “partly due to high gas-directed drilling rates and partly due to continued recovery in the Gulf of Mexico from the effects of Hurricane Ivan.”
The agency expects the supply picture for 2005 to improve moderately due to increases in liquefied natural gas imports, restrained export growth and “carryover from the robust storage levels” in late 2004.
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