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EIA forecasts $80 oil price this year Henry Hub natural gas spot price projected to average $5.36 per thousand cubic feet in ’10; storage levels expected to remain high Petroleum News
The U.S. Department of Energy’s Energy Information Administration said Jan. 12 in its Short-Term Energy Outlook that it expects the price of West Texas Intermediate crude oil to average $80 per barrel this year and $84 in 2011, compared to a 2009 average of $62 per barrel.
EIA said that forecast is based on a growth of 2 percent in U.S. real gross domestic product this year, and a 2.7 percent growth in 2011, with world oil-consumption-weighted real GDP growing by 2.5 percent this year and by 3.7 percent in 2011.
The annual average Henry Hub spot price for natural gas is expected to average $5.36 per thousand cubic feet this year, a $1.30 increase over the 2009 average of $4.06.
The price is forecast to continue to grow, averaging $6.12 in 2011.
Tightening world oil market EIA said if global economic recovery continues as projected the world oil market should gradually tighten this year and next. Countries outside the Organization for Economic Cooperation and Development will lead the recovery, but OECD countries are expected to show significant oil demand growth in 2011, the agency said, with projected OECD economic growth expected to more than double from 1.2 percent in 2010 to 2.7 percent in 2011.
Compliance with Organization of the Petroleum Exporting Countries production cuts has weakened and global oil inventories and spare production remain very high by historical standards, EIA said, but “expectations of a continued global economic turnaround have continued to buttress oil markets.”
“EIA expects that WTI prices, which have been trending upward since February 2009, will continue to increase in 2010 and 2011,” the agency said.
2009 was a second consecutive year of decline in global oil demand, the first time that has occurred since 1983, but the decline bottomed out in mid-2009 as the world economy began to recover, a recovery which EIA said it expects to see continue in 2010 and 2011, contributing to global oil demand growth of 1.1 million barrels per day this year and 1.5 million bpd in 2011.
An increased demand of 200,000 bpd is expected in the U.S. this year, but China continues to lead consumption growth with projected increases of more than 400,000 bpd in both 2010 and 2011.
Non-OPEC supply up There was an increase of more than 600,000 bpd in non-OPEC supply in 2009, the largest annual increase since 2004, EIA said, driven by higher production in the United States, Brazil and the Former Soviet Union.
Large declines in North Sea and Mexican production are expected to offset a large projected increase from Brazil in 2010 and 2011, with low overall non-OPEC growth expected in that period.
OPEC kept its current oil production levels unchanged at its December meeting.
“Although OPEC faces a global oil market that has firmed in response to its production cuts since last January, the strength and durability of the global economic recovery is still uncertain,” EIA said.
Annual average OPEC crude oil production declined almost 2.2 million bpd on average in 2009, and EIA said it expects an increase of some 500,000 bpd in 2010 and 2011.
OPEC surplus crude oil production averaged 2.8 million bpd in 1998-2008, is expected to remain high and could reach almost 6 million bpd by the end of 2011, EIA said.
WTI crude oil spot prices averaged $74.50 per barrel in December, down some $3.50 per barrel from November, reflecting spot weakness in the first two weeks of the month. Colder-than-normal temperatures helped push the WTI spot price back up to $79 per barrel by the end of December.
EIA said it is forecasting weaker WTI spot prices over the next few months, with an average of $76 per barrel in March, before prices rise to some $82 per barrel in late spring and to $85 by the beginning of next winter.
Natural gas use down EIA said it estimates that natural gas consumption fell by 1.5 percent in 2009, “primarily because of the economic downturn.” Low natural gas prices contributed to an increase in gas-fired electric power generation, but the agency said that was offset by declines in industrial, residential and commercial sector consumption.
EIA expects total natural gas consumption to remain relatively unchanged this year, with higher natural gas prices expected to cause a 2.8 percent decline in electric power sector consumption of natural gas, offsetting growth in the residential, commercial and industrial consumption.
A 0.4 percent increase in natural gas consumption is forecast for 2011, led by a 2.5 percent growth in industrial consumption.
There was a 59 percent decline in working natural gas rigs from September 2008 to July 2009, but EIA estimates total marketed natural gas production increased by 3.7 percent last year.
Working natural gas rigs reached a low of 665 in mid-July, but the number was at 759 on Dec. 31, the agency said.
2009 production growth was supported by enhanced productivity of new wells, but “steep declines from initial production at these newly drilled wells and the lagged effect of reduced drilling activity” are expected to contribute to a 3 percent decline in production this year.
The agency expects a 1.3 percent increase in marketed production in 2011 as growth in production from Lower 48 non-Gulf of Mexico fields offsets a decline in Gulf of Mexico production.
Working natural gas in storage was 3.123 trillion cubic feet on Jan. 1, 316 billion cubic feet above the previous five-year average and 286 bcf above the level for the corresponding week in 2009.
There were large December draw-downs due to colder-than-normal temperatures, but EIA said it expects the end-of-March storage level of 1.734 tcf will be about 16 percent greater than the previous five-year average for that period.
The Henry Hub spot price averaged $5.50 per thousand cubic feet in December, $1.73 above the November average.
The 2009 average Henry Hub spot price was $4.06 per thousand cubic feet, and an average of $5.36 is projected for 2010 and $6.12 for 2011.
“Continued high storage levels combined with enhanced domestic production capabilities and slow consumption growth are expected to keep prices from rising dramatically through the forecast” period of 2010-11, EIA said.
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