Petroleum ForecastsThe US Department of Energy releases monthly updates on petroleum projections.
As of December 19th, 2008:
The current global economic slowdown is now projected to be more severe and longer than in last month’s Outlook, leading to further reductions of global energy demand and additional declines in crude oil and other energy prices.
The monthly average price of West Texas Intermediate (WTI) crude oil has fallen by more than half between July and November, reflecting the fallout from the rapid decline in world petroleum demand. The annual average WTI price is now projected to be $100 per barrel in 2008 and $51 in 2009.
The average U.S. prices for regular-grade gasoline and diesel fuel, at $1.70 and $2.52 per gallon respectively on December 8, were both more than $2 per gallon below their highs in mid-July. With the assumption of a fragile economy throughout 2009, along with lower projected crude oil prices, annual average retail gasoline and diesel fuel prices in 2009 are projected to be $2.03 and $2.47 per gallon, respectively.
Residential heating oil prices during this current heating season (October though March) are projected to average $2.53 per gallon, a reduction of 24 percent from the 2007-2008 heating season. Residential propane prices are projected to average $2.10 this winter, a decrease of 14 percent from last winter. Residential natural gas prices are projected to average $12.56 per thousand cubic feet (Mcf), a decrease of 1.3 percent from last winter.
The U.S. economic recession is also contributing to lower natural gas wellhead prices. The Henry Hub natural gas spot price is projected to decline from an average of $9.17 per Mcf in 2008 to $6.25 per Mcf in 2009.
Overview. The increasing likelihood of a prolonged global economic downturn continues to dominate market perceptions, putting downward pressure on oil prices. World real gross domestic product (GDP) growth is projected to slow from about 4 percent in 2006 and 2007 to about 2.7 percent this year and 0.5 percent in 2009. Last month’s Outlook assumed world GDP would increase by 1.8 percent in 2009. The condition of the global economy and production decisions by members of the Organization of Petroleum Exporting Countries (OPEC) are expected to remain the crucial factors driving world oil prices.
Consumption. The status of the global economy has become the most important driver of oil consumption growth and EIA’s oil consumption projections continue to be revised downward in response to lower forecasts for global economic growth. As a result, global oil consumption is expected to decline by 50,000 bbl/d in 2008 and by 450,000 bbl/d in 2009, which would mark the first time in 3 decades that world consumption would decline in 2 consecutive years. In both years, growth is concentrated in countries outside of the Organization for Economic Cooperation and Development (OECD), especially China, the Middle East, and Latin America. However, projected sharp declines in oil consumption in OECD countries more than offset any non-OECD oil consumption growth. If the world economy recovers sooner or is stronger than EIA now anticipates, oil consumption could decline at a slower rate or potentially increase instead, putting upward pressure on oil prices.
Inventories.Revised data indicate that OECD commercial inventories rose by 568,000 bbl/d in the third quarter of 2008, somewhat higher than historic rates for inventory builds during this time of year. OECDcommercial inventories stood at 2.65 billion barrels at the end of the third quarter, equivalent to 57 days of forward consumption cover. On the basis of days of forward cover, OECD commercial inventories are well above historic levels, and EIA projects that they will remain there through the end of 2009.
Consumption. Total natural gas consumption, which is more weather-driven than oil consumption, is expected to increase by 0.5 percent in 2008 and remain flat in 2009. Consumption is projected to be higher in every sector in 2008, except for electric power, primarily due to the projected 5.3-percent increase in heating degree-days compared with last year. In 2009, consumption in the residential, commercial, and electric power sectors is expected to grow, albeit slightly. However, poor economic conditions both domestically and worldwide are expected to hamper U.S. industrial production activities through the forecast period. As a result, natural gas consumption in the industrial sector is expected to decline by 2.4 percent in 2009.
Production and Imports. Total U.S. marketed natural gas production is expected to increase by 5.4 percent in 2008 and by 0.9 percent in 2009. Domestic natural gas production continues to surge behind strong growth in the Lower-48 onshore, where annual average production is expected to increase by 9.1 percent this year. However, a dip in recent drilling activity, reflecting lower average prices and poor economic conditions, is expected to limit onshore production growth to 0.8 percent in 2009. Production outages in the Federal Gulf of Mexico (GOM) caused by Hurricanes Gustav and Ike led to a decline in offshore production of 14.5 percent in 2008. Production in the Federal GOM is expected to increase by 1.8 percent in 2009. U.S. imports of liquefied natural gas (LNG) are expected to total about 360 billion cubic feet (Bcf) in 2008 and slightly over 400 Bcf in 2009, remaining well below the 2007 level.
Inventories. On November 28, 2008, working natural gas in storage was 3,358 Bcf. Current inventories are now 69 Bcf above the 5-year average (2003–2007) and 107 Bcf below the level during the corresponding week last year.Prices. The Henry Hub spot price averaged $6.87 per Mcf in November. Natural gas prices, which have declined from a monthly average of $13.06 per Mcf in June, reflect the impact of increased domestic production, the weak economy, and lower oil prices. While these factors are expected to lead to lower natural gas prices throughout the forecast period, the pass-through of higher natural gas prices paid earlier in the year for supplies that will be called upon to meet winter demand is expected to contribute to a small increase in heating expenditures this winter for households that use gas as their primary heating fuel. On an annual basis, the Henry Hub spot price is expected to average $9.17 per Mcf in 2008 and $6.25 per Mcf in 2009, compared with $7.17 per Mcf in 2007.