Energy Information Administration sees strengthening oil prices New supplies, lack of demand growth, expected to keep natural gas prices from re-surging this summer Petroleum News Alaska
Crude oil prices may strengthen over the rest of the summer since OPEC has said it does not intend to increase production quotas, the U.S. Department of Energy’s Energy Information Administration said in its July short-term energy outlook.
The EIA said its base case projection is for total OPEC crude production in the third quarter to be about 27.3 million barrels per day, a 1.6 million bpd increase above the estimated June level, but only a 200,000 bpd increase over the second quarter OPEC average.
The spot market price of West Texas Intermediate crude oil, which averaged $27.60 per barrel in June (down from $28.60 in May) and continued to drop in July, is expected to reach approximately $30 per barrel by September. The WTI average would be expected to be about $28 per barrel for all of 2001 with a very similar average expected for 2002.
The EIA said a July 2 survey of gasoline retail prices marked the fifth consecutive weekly decline in national average prices, with regular gasoline at $1.47 per gallon, down 24 cents from a high of $1.71 a gallon the week of May 14. The price dropped following a sharp increase in gasoline production during April and May.
The June average for regular gasoline was about $1.62 per gallon and the EIA said it expects the July average to be slightly below $1.44 per gallon. The spike in refinery profitability per unit of gasoline produced has all but disappeared over the last several weeks. New supplies of natural gas Spot natural gas prices have fallen about $1 per million Btu to near $3 since June and storage supplies have grown due to continued high levels of new supply relative to demand. Relatively mild weather and lost demand in industrial and utility sectors have contributed.
Spot natural gas prices at key regional market points have come down dramatically since the spikes of December 2000-January 2001. Even prices at the Southern California border have collapsed toward the national average after spending the November to May period elevated to well above other spot market prices.
In addition to new supply outstripping demand growth this year, the EIA said there are other factors that may keep gas prices from re-surging this summer, including the likelihood that it will be cooler in Texas this summer than last; greater efficiency of new gas-fired generating plants; potential for slower-than-expected economic growth.
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