Higher energy prices reflect healthier economy - US consultant

13 January 2011 22:06  [Source: ICIS news]

HOUSTON (ICIS)--The latest increase in energy prices reflects sentiment that the global economy will continue to improve, a consulting executive said on Thursday, citing slightly lower US unemployment and increased gasoline consumption.

The global economy grew by 3.6% in 2010 and will expand by 3.3% in 2011, predicted Steven Jones, vice president for consulting firm Purvin & Gertz during a presentation for the Southwest Chemical Association (SWCA).

According to the analyst, the global economy made a robust comeback from the 2008 financial crisis, a recovery that was initially fuelled by resilience in the developing world and has since spread to more mature economies, he said.

Economic indicators from miles travelled to lower unemployment point to improved fundamentals, but the consultant warned that the US was still far from another “golden age”.

“In reality, we are still years away from it,” Jones said, predicting another couple of years of “soft spots” for the US.

Crude oil was likely to move towards $100/bbl in the coming months, but the consultant said a further uptrend was likely to be limited, as a drop in demand would quickly undermine an upswing.

Crude oil now is where it should be, which is around $90/bbl, he said.

The analyst expected natural gas prices to remain constrained because of ample supply, predicting prices would remain in the $5/MMBtu range for the foreseeable future.

“From the supply side we will continue to see mounting pressure,” he added, citing growing production from shale gas fields.

Lower natural gas prices will keep the crude-to-gas fundamental ratio attractive, Jones said, predicting natural gas liquids (NGL), such as ethane, would continue being the feedstock of choice for US crackers.

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By: William Lemos
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