US raises oil, natgas pricing outlook, citing economy growth

07 December 2010 22:19  [Source: ICIS news]

WASHINGTON (ICIS)--The Department of Energy (DOE) on Tuesday raised its forecasts for average oil and natural gas prices for this year and 2011, citing improving economic conditions in the US and moderately increasing gains in global economies.

The department’s energy data and analysis arm, the Energy Information Administration (EIA), said it expected the price of benchmark West Texas Intermediate (WTI) crude to average $84/bbl over the North American winter months of October through March, an increase of $1/bbl from the administration’s estimate of a month ago.

In its monthly short-term energy outlook (STEO), the administration said that it expected WTI prices to rise to $89/bbl by the end of 2011, an increase of $2/bbl from November’s outlook.

“EIA’s forecast assumes US real gross domestic product [GDP] grows 2.7% in 2010 and 2.1% in 2011, while world real GDP [weighted by oil consumption] grows by 4% and 3.2% in 2010 and 2011 respectively,” the administration said.

The EIA’s forecast of 2.7% US GDP growth for this year was up narrowly from last month’s outlook of 2.6% GDP expansion for 2010.

The administration also expected slightly better GDP performance worldwide, increasing to 4% growth this year compared with its November outlook of 3.9%.

In natural gas, the department said it expected the average full-year average price in the Henry Hub spot market would be $4.37/MMBtu for this year, a two-cents increase from its forecast last month.

The administration similarly raised its forecast for the average Henry Hub spot price to $4.33/MMBtu for 2011, also a two-cent increase from the November outlook.

The US petrochemicals industry and downstream chemical manufacturers are heavily dependent on natural gas as a feedstock and energy fuel.

EIA said that it expects US full-year 2010 natgas production would show a gain of 3.5% compared with 2009, an increase from the 2.5% advance forecast last month.

The department said it expected US domestic gas production in 2011 would be essentially flat with the 2010 output, with an expected 14.3% decline in Gulf of Mexico production mostly offset by a 1.4% increase in onshore gas production in the Lower 48 states.

The 14.3% decline in Gulf of Mexico gas production forecast for next year was apparently related to the hiatus in Gulf oil and gas drilling triggered by the BP Deepwater Horizon rig collapse in April 2010, the resulting 5m-bbl oil spill, the related federal drilling moratorium and tougher leasing and safety requirements.

The US Interior Department announced last week a new moratorium on offshore drilling that would likely mean no new leasing in the Gulf of Mexico for all of 2011.

The 1.4% gain in onshore natgas output forecast for 2011 was in part related to increasing production of shale gas. The department reported late last month that US proven reserves of natural gas have increased by 11%, citing growth in shale gas assets.

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