US Energy Dept raises oil, gas outlook sharply

10 June 2008 18:28  [Source: ICIS news]

WASHINGTON (ICIS news)--The US Energy Department revised its outlook for oil and natural gas prices sharply upward on Tuesday, saying that crude is likely to average $122/bbl this year and natgas will average around $11/m Btu for 2008 and 2009 as well.

 

Last month the department’s Energy Information Administration (EIA) said in its short term energy outlook (STEO) that benchmark US West Texas intermediate crude would average only $110/bbl for this year.

 

The administration’s revised outlook of $122/bbl as an average price for this year represents an 11% upward shift in just one month and reflects the steadily increasing price for oil on the world market, which was around $137/bbl in recent trading.

 

The administration revised its forecast for the average 2008 price of natural gas by fully 13.4% from last month’s energy outlook.  Recent spot prices for natural gas at Henry Hub were around $12.50/m Btu, according to global petrochemical market intelligence service ICIS pricing.

 

The availability and price of natural gas is a critical concern for US petrochemicals producers because they are heavily dependent on gas as a feedstock and an energy source.

 

As recently as 1999, Henry Hub spot prices for natgas were around $2/m Btu, so today’s price of more than $12/m Btu represents a five-fold increase.

 

Looking at the global oil situation, the administration said that “The overall picture of strong demand and tight supply is expected to continue”.

 

The EIA also forecast that US retail gasoline prices would peak at around $4.15/gal in August, representing another upward revision from last month’s prediction of a $3.73/gal peak in June. 

 

Average US retail gasoline prices are already at $4.04 this week, suggesting that the EIA’s forecast of a $4.15/gal peak in August may well be overtaken, unless there is some demand destruction over the next eight weeks. 

 

($1 = €0.64)

 

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By: Joe Kamalick
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