US sees rising prices for Brent, WTI, natgas this year and next

07 August 2012 22:26  [Source: ICIS news]

WASHINGTON (ICIS)--The US Energy Department on Tuesday raised its pricing forecast for both Brent and West Texas Intermediate (WTI) crude oil prices for the second half this year and said US natural gas prices would likely rise by 25% next year.

In its monthly short-term energy outlook (STEO), the department’s Energy Information Administration (EIA) said that it expects the Brent crude oil spot price will average about $103/bbl in the second half of this year, a forecast that is $3.50/bbl higher than its outlook last month.

The administration, which serves as the department’s data collection and analysis arm, said that WTI spot prices would likely average $90/bbl over the second half of 2012, which is $2/bbl higher than the EIA’s estimate of a month ago.

In natural gas, the administration said that domestic spot prices are about to experience a significant turnaround.

While the Henry Hub spot price for natural gas averaged $4/MMBtu in 2011, EIA said it is expected to fall to a full-year 2012 average of $2.67/MMBtu but then climb to an average $3.34/MMBtu for 2013.

Increasing use of natgas instead of coal as a fuel for electric power generation is said to be driving the forecast for pricing gains.

The availability and pricing of natural gas is of critical importance to the US petrochemicals industry and downstream chemical makers who are heavily dependent on natgas as both a feedstock and energy fuel.

The increase in the administration’s forecast for US WTI oil prices for this year comes despite gains in US domestic oil production predicted for this year and next.

The EIA said that US crude output this year is expected to average 6.3m bbl/day (bpd), an increase of 600,000 bpd from last year and the highest level of domestic US oil production since 1997.

US oil production is forecast to increase by another 400,000 bpd in 2013 to a full-year average of 6.7m bpd, the EIA said.

The predicted increases in both WTI and Brent crude prices were attributed to market expectations that policymakers in the US, EU and China will provide more economic stimulus to counteract slowing growth and fears of a new global recession, the administration said.

In addition, said the EIA, “Iran’s threats to block oil from transiting through the Strait of Hormuz have triggered market anxiety and prompted upward price pressure”.

However, the administration cautioned that its outlook for higher crude and natgas prices could be quickly countered by events, including “the possibility that the economic situation in EU countries could deteriorate further”.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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