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Oil prices rise on concerns about situations in Iraq, Venezuela Cold weather has driven natural gas prices up, and the EIA expects those prices to average $3.90 per mcf for the winter season unless the weather turns warmer Petroleum News Alaska
After falling by about $2.50 a barrel between October and November in response to high production by the Organization of Petroleum Exporting Countries, the crude oil price rose at end of November over concerns about situations in Iraq and Venezuela, the U.S. Department of Energy’s Energy Information Administration said Dec. 9 in its December short-term energy outlook.
The OPEC basket price for crude oil has remained above $22 per barrel since March 8, the agency said, and is expected to stay within the $22-$28 per barrel target range in the short term.
Natural gas prices are poised to rise beyond already high levels through January and February, the agency said, unless there is a “profound turnabout” in the weather, which was colder than normal in November. If weather is normal for the remainder of the heating season, December through March, the agency said if projects natural gas wellhead prices for this winter season, October through March, will average $3.90 per thousand cubic feet which is $1.50 per mcf, 60 percent, above last winter’s price.
Henry Hub climbed over $4 per million Btu mark After drifting between $3.80 and $3.90 per million Btu during the first half of November, the Henry Hub spot price for natural gas climbed above the $4 per million Btu mark in the last half of November, the EIA said, as colder-than-normal temperatures for October and November throughout much of the Lower 48 reduced storage levels.
Colder than normal temperatures in November reduced storage to below 3 trillion cubic feet, causing the spot price rise to above $4 per million Btu, with storage 9 percent lower at the end of November than at that time last year. Without a “profound turnabout” in the weather over the next several months, prices are poised to rise even further through January and February, the agency said.
With a heating season average expected at $3.90 per mcf, the 2002 annual average natural gas wellhead price is projected to be close to $3 per mcf, compared to $4 per mcf in 2001. The agency said it is projecting the wellhead price for 2003 to be up about 70 cents per mcf compared to 2002, based on lower volumes of gas in storage and continued increases in demand.
Weather driving oil demand The EIA said that colder-than-normal weather and indications of recovery in industrial activity are beginning to drive an increase in total petroleum demand.
“October data show only a slight year-to-year increase in demand, but available data for November point to strong year-to-year growth,” the agency said. Heating degree-days in the Northeast for October and November were 21 and 12 percent, respectively, higher than normal, and December’s weather in that region is so far colder than normal.
“Projections for December indicate a 1.5 million barrels-per-day increase in demand from that of last year, which would be one of the largest such increases on record,” the EIA said.
The weather, however, may not stay cold. The EIA said the National Weather Service is predicting that that El Niño effects are likely to yield above average temperatures in the upper Midwest and Northeast regions during the December-January-February period.
Average domestic oil production is expected to decrease 0.1 percent in 2002, to 5.8 million bpd, with a 3.5 percent increase to 5.6 million bpd expected in 2003.
Lower 48 oil production is expected to decrease by 179,000 bpd to 4.63 million bpd in 2003. The EIA said Alaska oil production is expected to decrease by 2.1 percent in 2003.
Natural gas demand down For the first half of 2002, natural gas demand fell 750 billion cubic feet, a 6.5 percent decline from 2001 levels. The EIA said much of the decline in the first two quarters of the year was weather related.
“During the second-half of the year, large year-over-year increases in demand in the residential and commercial sectors, fed by weather-related increases in the fourth quarter, remain highly probable,” the agency said. It expects “an average natural gas demand increase for the last six months of 2002 of 14.4 percent in the combined residential and commercial sectors relative to 2001 levels.”
Total natural gas demand for 2002 is expected to be down by 0.9 percent from 2001 due to overall weakness in the industrial sector.
Working natural gas storage is down about 9 percent from year-ago levels and the EIA said it is forecasting an average natural gas wellhead price for 2003 of $3.69 per mcf, an increase of about 74 cents per mcf above the 2002 yearly average of $2.95 per mcf.
The EIA said domestic gas production is expected to fall some 1.6 percent in 2002 compared to the 2001 growth rate of 2.4 percent, driven down by lower demand and lower natural gas prices.
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