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EIA expects world energy supply to exceed demand this year Energy Information Administration says markets on track to delivery gradually declining crude oil prices through 2000, 2001 Petroleum News Alaska
The U.S. Department of Energy’s Energy Information Administration said Aug. 8 in its short-term energy forecast that it expects world supply this year to exceed demand: “World oil markets, while remaining sensitive to near-term supply indicators, including U.S. inventory levels, are, in our estimation, still on track to deliver gradually declining crude oil prices through the end of this year and through 2001 as well.”
The agency expects world supply in 2000 (76.6 million barrels per day) to exceed demand (75.8 million barrels per day), leading to a reversal of the downshift in petroleum inventories in industrialized countries observed since mid-1999. The EIA said its base case projections imply that, while average crude prices will have risen over $9 per barrel in 2000, an average decline of $4-$5 per barrel is seen for 2001. Retail gasoline prices have retreated In midsummer, weekly retail gasoline prices have retreated sharply since late June, exceeding the EIA’s previous estimates of expected declines. Weekly price averages fell 20 cents per gallon from the third week in June to the end of July. Relief to the Midwest, hard-pressed to meet summer gasoline supplies in June, has exceeded expectations. The agency said this development has contributed sharply to average U.S. price reductions (the observed price reductions were only marginally contributed to by state tax relief initiatives).
The agency noted since spot prices have shown upward momentum in recent trading sessions, it cannot rule out the possibility of some increases at the pump before summer’s end. The industry still needs to get through August, the EIA said. Natural gas market vulnerable Natural gas market activity continues to reveal the backdrop of vulnerability of the U.S. market to potential supply shortfalls, particularly in view of burgeoning power sector demands and large potential increases in heating demand just a few months down the road.
While forward wellhead gas prices have retreated from the observed highs in June, a resurgence in early August in spot and futures prices illustrates continued volatility amidst uncertainty regarding North American supply adequacy, demand potential, and even potential hurricane damage. While weather reigns supreme in the hierarchy of short-run factors affecting the natural gas demand and supply balance, the other important factor that bears watching is the anticipated turnaround in North American gas production performance. High (and growing) rates of gas drilling activity promise solid improvement, but apparent performance so far in 2000 curtails optimism about significant improvements occurring before the onset of the heating season.
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