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Upward, downward pressures on oil prices EIA: Supply uncertainty from unrest in oil-producing regions v. fears about rate of global economic recovery, European debt crisis Kristen Nelson Petroleum News
Oil prices face both upward and downward pressures, the Energy Information Administration said in its Oct. 12 short-term energy and winter fuels outlook.
Upward pressure comes from supply uncertainty because of ongoing unrest in oil-producing regions. EIA said the turmoil in Syria, which produced an average 400,000 barrels per day in 2010, and potential for more sanctions on the country’s energy sector “is one source of risk to non-OPEC supply.”
But, the agency said, “downside demand risks predominate, as fears persist about the rate of global economic recovery, contagion effects of the debt crisis in the European Union, and other fiscal issues facing national governments.”
If Libya is able to ramp up production and exports sooner than anticipated, that would put downward pressure on prices on the supply side.
U.S. real gross domestic product is forecast to grow by 1.5 percent this year and by 1.8 percent in 2012, slightly lower than September’s forecast, and world oil-consumption-weighted real GDP is forecast to grow by 3 percent this year and 3.5 percent in 2012, down from a forecast of 3.1 percent and 3.8 percent in EIA’s September forecast.
Crude oil prices EIA reports both “U.S. average refiner acquisition cost of crude oil” and the more traditional West Texas Intermediate crude oil spot prices.
The agency said it expects the U.S. average refiner acquisition cost of crude oil to average $99 per barrel this year and $98 per barrel next year — down from its forecast in September of $100 and $103 per barrel for the two years.
WTI crude oil spot prices fell from an average of $97 per barrel in July to $86 per barrel in August and September and the WTI spot price for October began below $80 per barrel. EIA said it revised projected oil prices down from its September forecast.
“The significant price discount for WTI relative to other U.S. and world crude oils is expected to continue until transportation bottlenecks restricting the movement of crude oil out of the mid-continent region are relieved,” EIA said.
U.S. refiner acquisition cost, which had averaged almost $2.70 per barrel below WTI in 2010, has averaged about $7 above WIT in 2011 and is expected to average $10 above WTI next year.
EIA said the Henry Hub spot price for natural gas averaged $3.90 per million Btu in September, 15 cents lower than the August average, and the agency expects spot prices to fall further in October before rising above $4 in December.
The average 2011 spot price is lower than the 2010 average, EIA said, but “the forecast price over the winter 2011-12 is higher than last winter’s average.”
Crude oil supply EIA is projecting that non-OPEC, Organization of the Petroleum Exporting Countries, liquids fuels production will grow by 0.49 million barrels per day this year and 0.85 million bpd in 2012 to an average of 53.1 million bpd, with Brazil, Canada, China, Colombia, Kazakhstan and the United States the largest sources of expected non-OPEC oil production growth. Annual growth in each of those countries is projected at more than 100,000 bpd.
Russian, Mexican and North Sea production is expected to be lower by the end of 2012.
OPEC crude oil production is expected to decline by 30,000 bpd this year, a sharp contrast to EIA’s September forecast of a drop of 360,000 bpd. The agency said the change is largely due to increased production in Saudi Arabia.
EIA said it still believes Libya will get about half of its pre-disruption production back online by the end of 2012, contributing to an overall growth in OPEC crude oil production of 270,000 bpd next year.
The agency said it expects that OPEC surplus crude oil production capacity fell from 4 million bpd in the fourth quarter of 2010 to 2.8 million bpd in the fourth quarter this year, but will increase to 3.5 million bpd by the end of 2012 as Libyan production capacity comes back online.
Domestic crude oil EIA said that domestic crude oil production increased by 110,000 bpd last year to 5.5 million bpd, increased a further 180,000 bpd this year and is projected to increase by 70,000 bpd in 2012, “driven by increased oil-directed drilling activity, particularly in unconventional shale formations.”
U.S. marketed natural gas production is expected to average 66 billion cubic feet per day this year, a 4.2 bcf per day (6.7 percent) increase over 2010. The increase is from onshore production in the Lower 48 states, which will more than offset a 0.9 bcf per day (15 percent) decline in the Gulf of Mexico and a small decline in Alaska.
EIA said it expects overall production will grow in 2012, but at a slower pace, increasing 1.4 bcf per day (2.1 percent) to an average of 67.4 bcf per day.
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