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Oil prices to remain high, says EIA Agency expects crude prices to remain in mid- to high-$40s range through 2005; natural gas prices at $6-plus Petroleum News
Citing strong demand growth for crude oil in 2004, expected to continue in 2005, and relatively low oil inventories in industrialized countries, crude oil prices are expected “to remain elevated in the mid- to high-$40s range through 2005,” the U.S. Department of Energy’s Energy Information Administration said Nov. 9.
The agency said U.S. spot prices for West Texas Intermediate have ranged from less than $49 per barrel to more than $56 per barrel since mid-October, and the projected average WTI price for the fourth quarter is just above $51 per barrel, about $20 per barrel higher than the 2003 fourth quarter price, and about $5 per barrel above the agency’s previous projection for the fourth quarter.
The agency said a sharp increase in WTI prices in October was due in part to production losses in the Gulf of Mexico caused by Hurricane Ivan. The Minerals Management Service said in early October that some 500,000 barrels per day of Gulf oil output were shut in, a number which had dropped to some 200,000 bpd by early November.
Because of relatively low inventories in industrialized countries, combined with strong demand and limited prospects for large increases in production outside of Organization of Petroleum Exporting Countries in the near term, oil prices are expected to remain elevated through 2005, the agency said, even though OPEC crude oil production remains high at about 30 million bpd.
“OPEC production capacity (and, thus, world oil production capacity) remains about 0.5-1.0 million barrels per day above current output levels, an implied global utilization rate of about 99 percent,” the agency said.
The agency said it has revised upward its estimation of world petroleum demand growth for 2004 to 2.8 million bpd above 2003 levels, a 3.5 percent growth from 2003. “Global oil demand growth is expected to slow to 2.4 percent in 2005 as global economic growth slows toward more sustainable rates, influenced in part by high world oil prices,” the agency said.
In the United States, demand growth for 2004 is expected to average 20.4 million bpd, up 2 percent from 2003, a demand which the agency expects to slow to 1 percent in 2005 “as a result of moderation in economic growth and continued high energy prices.” Natural gas prices also up Natural gas production was also impacted by losses of Gulf of Mexico production, and the average spot price for natural gas at the Henry Hub was $5.15 per thousand cubic feet in September and $6.54 per mcf in October, with Henry Hub prices expected to average $6.18 per mcf in 2004 and $6.33 per mcf in 2005.
Working natural gas in storage “is estimated to have reached its highest level sine 1991” at 3.305 trillion cubic feet, the agency said, 6 percent higher than a year ago and 9 percent higher than the five-year average.
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