DOE sees world oil prices rising to $13 a barrel by year-end

Agency’s assumption based on growing demand, reduced overhang of world oil stocks, return to normal weather patterns

The U.S. Department of Energy’s Energy Information Administration is forecasting a world oil price of $13 per barrel by the end of 1999 — a gain of $3.75 from the estimated December 1998 level.

In the latest monthly update of its “Short-Term Energy Outlook,” the agency predicted the price will move above $14 per barrel by the end of 2000, a far cry from 1997’s $18.60.

World oil supply is expected to increase by only 600,000 barrels per day in 1999, and by another 1.1 million barrels in 2000.

“World demand is expected to grow at a faster rate through 2000 than it did in 1998, suggesting an end to the build-up of world oil stocks seen since 1995,” the agency reported.

The EIA said U.S. petroleum demand is expected to increase in 1999 by more than 500,000 barrels per day, or 2.9 percent from 1998, despite assumptions of reduced economic growth.

It attributed most of this growth to a growing demand for heating oil and other weather-sensitive products (such as propane and heavy fuel oil), based on “an assumed return to normal weather patterns, as well as continued growth in transportation demand.”

U.S. net imports of petroleum in 2000 are forecast to account for 52 percent of total U.S. petroleum demand, compared with an estimated 50 percent in 1998.

In other projections, the EIA said:

• Based on low oil prices and an abundance of distillate, U.S. heating oil prices in first quarter 1999 are expected to rise an average of just 2 cents per gallon above fourth-quarter 1998 prices, but still 10 cents per gallon below the first-quarter 1998 average.

• Iraqi oil exports do not appear to have been affected by U.S. and British air strikes in mid-December. The EIA said the forecast assumes Iraqi oil exports will continue under the current United Nations Security Council resolutions, allowing Iraq to export about 1.8 million barrels per day in 1999 and 2 million barrels per day in 2000.

• Natural gas spot prices are projected to remain under $2 per thousand cubic feet through the summer of 1999, unless weather in the gas-consuming regions turns unusually cold over the next few months. Current high storage levels will serve to moderate prices.

• Electricity demand in 1999 is expected to rise 1.6 percent over 1998, reflecting a return to normal summer weather (cooler than in 1998) and a general slowing in the economy.

The EIA’s forecast analysis, tables and charts can be downloaded from the EIA home page at http://www.eia.doe.gov and selecting “Forecasts” from the menu. The Internet address for direct access to the report is: http://www.eia.doe.gov/emeu/steo/pub