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Prices could stay close to $30 a barrel this winter
Petroleum News Alaska Staff
The U.S. Department of Energy’s Energy Information Administration’s latest short-term forecast, issued Sept. 6, says the agency expects to see crude prices stay on the high side. The EIA said “a modest measure of restraint with respect to oil output by OPEC would probably keep oil prices closer to $30 per barrel than to $20 through 2003, even if the political and military status quo were maintained.”
The EIA said the West Texas Intermediate crude oil spot price averaged $28.40 per barrel in August, with the price bouncing between $26 and $30 a barrel most of the month.
An easing of tensions over a possible U.S. military action against Iraq would temporarily send the price lower, the agency said, but winter demand “is likely to tighten world oil markets and reduce commercial oil inventories.”
The EIA said there is a wide range of uncertainty in oil prices due to weather, OPEC actions and general economic conditions. Weather a factor If winter weather conditions are normal, the EIA said, “fuel supply conditions are expected to be sufficient to avoid any serious heating fuel price spikes this winter.”
The summer was hotter than normal, with cooling degree days about 11 percent about normal, but natural gas storage is still on track to very high, perhaps record, pre-winter season storage levels, the agency said. The high storage level “provides a direct cushion against price spikes for natural gas end users and indirect insurance for fuel oil users” because incentives for fuel switching will probably be minimal.
But heating fuel prices are high and strong demand increases are expected to generate higher winter heating bills for most residential customers this winter compared to last. Gas demand increases expected A high probability of a comparatively cold winter and expected strong U.S. economy recovery by year-end are expected to produce sharp increases in natural gas demand this winter, the EIA said. The agency forecasts an increase of 12 percent in natural gas demand this winter compared to last winter, and says that demand will probably use of much of the accumulated cushion in natural gas storage.
Severe price spikes are unlikely, but the EIA said it did expect to see the demand for natural gas in the industrial and power sections “lend above-average support to spot natural gas prices” and expects to see natural gas wellhead prices averaging $3.20 per thousand cubic feet, about 80 cents per mcf above last winter’s price.
The agency is forecasting a natural gas wellhead price of about $3.28 per mcf over all of 2003, compared to a $2.80 per mcf average for 2001.
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