US sees oil prices higher in ’09, natgas lower

09 September 2008 19:00  [Source: ICIS news]

WASHINGTON (ICIS news)--The US Department of Energy (DOE) said on Tuesday it expects the average price of crude oil to moderate further for 2008 but to climb anew in 2009, although average prices for natural gas will continue lower this year and next.

 

The department’s Energy Information Administration (EIA) said in its monthly outlook that benchmark West Texas Intermediate (ETI) crude will average $116/bbl this year, which marks a $3/bbl decline from the administration’s forecast in August.

 

In its short-term energy outlook (STEO) issued on Tuesday, the administration said that “projected stronger growth in world petroleum demand is expected to increase the annual average WTI price to $126/bbl in 2009”.

 

That 2009 forecast is $2/bbl higher than the administration predicted in its August outlook.

 

In natural gas, the EIA said that the Henry Hub spot price is expected to average about $9.70/m Btu this year and $8.55/m Btu in 2009. A month ago, the administration had expected US natgas prices to average $10/m Btu for 2008 and $9/m Btu next year.

 

The administration expects that global oil consumption growth for the third and fourth quarters this year will be lower than earlier forecast by 130,000bbl/day, chiefly due to weaker demand in the US and other industrialized countries in the Organization for Economic Cooperation and Development (OECD).

 

But crude prices are likely to rise in the new year because lower consumption in industrialized nations “is expected to be more than offset by continued non-OECD consumption growth, led by China, the Middle East, Latin America and India”.

 

In addition, the EIA said it “expects that OPEC will continue to assess market conditions in the months ahead and will lower crude oil production over the next few quarters in order to prevent a sharp decline in prices”.

 

The administration suggests that a combination of non-OECD demand growth and OPEC production cuts could trigger a crude oil price spike in the new year. “The main upside price risk is that the slowdown in global oil demand growth is temporary and that demand will recover,” the EIA said.

 

US natgas prices are expected to continue a downward trend through the rest of this year and into 2009 because consumption growth is forecast to moderate from the EIA’s earlier outlook while production improves this year and next.

 

The administration said it expects US gas consumption to increase by 2.7% this year; it had forecast a 3% demand growth last month. Gas demand is predicted to rise 1.7% in 2009, the EIA said, but that increase is substantially lower than its August forecast of 2.2% growth for next year.

 

At the same time, US marketed natural gas production is expected to rise by 7.8% this year and 3.8% in 2009, the EIA said.

 

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By: Joe Kamalick
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