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Old 02-10-2009, 05:03 PM
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Short-Term Energy Outlook....

Thought I would post this up... I receive these from the EIA every month.... The report has some interesting insight as to what's coming.....

EIA 2009 Energy Conference: A New Climate for Energy
Agenda now available, registration coming soon.
http://www.eia.doe.gov/eia_conference_2009.html



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Short-Term Energy Outlook

February 10, 2009 Release



To see details of this forecast update, go to the following World Wide Web site on the Internet:

http://www.eia.doe.gov/emeu/steo/pub/contents.html





Highlights





* U.S. real gross domestic product (GDP) is expected to decline by 2.7 percent in 2009, triggering decreases in domestic energy consumption for all major fuels. Economic recovery is projected to begin in 2010, with 2.2 percent year-over-year growth in GDP. Accompanying the projected economic recovery should be a mild rebound in energy consumption for all the major fuels in 2010.



* Over the past 6 months, the monthly average price of West Texas Intermediate (WTI) crude oil fell from $133 per barrel in July to $41 in December and January. WTI prices are projected to average $43 per barrel in 2009 and $55 in 2010, unchanged from last month’s Outlook.



* The U.S. price for regular gasoline averaged $1.69 per gallon in December 2008, the lowest monthly average since February 2004 and down nearly $2.40 per gallon from the monthly peak seen last July. Gasoline prices have been slowly increasing over the last 6 weeks as crude oil prices have stabilized and refiner margins have recovered from their recent near-historic lows. Retail gasoline prices are projected to average $1.95 per gallon in 2009 and $2.19 per gallon in 2010.



* The U.S. economic downturn is also contributing to a decline in natural gas consumption, particularly in the industrial sector, which has led to lower natural gas prices. The Henry Hub natural gas spot price is projected to decline from an average of $9.13 per thousand cubic feet (Mcf) in 2008 to about $5 per Mcf in 2009, but then increase in 2010 to an average of almost $6 per Mcf.



Global Petroleum

Overview. The worsening global economy and a weak oil consumption outlook are keeping the world oil market well supplied, despite two downward revisions in production targets by the Organization of the Petroleum Exporting Countries (OPEC) within the past few months. Lower global oil demand and rising surplus production capacity through at least mid-year 2009 reduce the possibility for a strong and sustained rebound in oil prices over that period. OPEC is scheduled to meet in Vienna on March 15, which could lead to another production cut to mitigate some of the slack in the world oil market. However, near-month oil prices will likely be driven primarily by the global economy. Global real gross domestic product (GDP, weighted according to shares of world oil consumption) is assumed to decline by 0.1 percent in 2009 and rise by 3.0 percent in 2010, versus last month’s assessment of 0.6-percent growth in real GDP in 2009 and 3.0-percent growth in 2010.

Consumption. World oil consumption is projected to fall by 1.2 million bbl/d in 2009, representing an additional decline of 400,000 bbl/d from last month’s Outlook. World oil consumption is expected to rebound in 2010, growing by more than 1.2 million bbl/d, due to an expected recovery in the global economy. Oil consumption growth over the next 2 years is concentrated in countries outside of the Organization for Economic Cooperation and Development (OECD), particularly China, the Middle East, and Latin America, offsetting projected declines in OECD oil consumption. If the world economy recovers sooner than EIA now anticipates, oil consumption could be higher than expected, putting upward pressure on oil prices.

Non-OPEC Supply. Non-OPEC oil supply is expected to grow by 150,000 bbl/d in 2009 and 130,000 bbl/d in 2010. The expected growth in non-OPEC supply over the next 2 years comes in stark contrast to the 330,000-bbl/d decline seen in 2008, which was the result of longer-than-expected delays in key projects, larger-than-expected decline rates in mature basins, and supply disruptions in the Gulf of Mexico and Central Asia. The largest sources of growth over the forecast period are the United States, Brazil, and Azerbaijan, offset by large declines in production in Mexico, the North Sea, and Russia. The expected decline in Russian output in 2009 (-160,000 bbl/d) is especially noteworthy. Russian oil production grew by 3 million bbl/d from 2000 through 2007, representing 75 percent of total non-OPEC oil production growth over that period.

There are downside risks to the outlook for non-OPEC supply, as additional project delays are certainly possible given the financial crisis and the current price environment. Sustained lower oil prices bring into doubt the viability of some high‐cost non‐OPEC projects, especially those utilizing nonconventional technology or those seeking to exploit frontier oil basins. The credit crunch associated with the global economic crisis can also make it difficult to acquire financing for new projects or even to finance the investment required to prevent accelerated declines at producing fields. EIA's forecast reflects an attempt to account for some of these potential delays.

OPEC Supply. OPEC producers are cutting crude production targets in response to lower prices and eroding consumption. Estimated OPEC crude oil production fell by 1 million bbl/d during the fourth quarter of 2008, reaching 30.7 million bbl/d. OPEC crude oil production is expected to fall by an additional 1.6 million bbl/d in the first quarter of 2009 to 29.1 million bbl/d, the lowest level in 5 years, largely resulting from lower production in Saudi Arabia. The decline of 2.6 million bbl/d over this period represents nearly two-thirds of the 4.2-million-bbl/d cut in OPEC’s production target announced at its December meeting. For the year, OPEC crude oil production is expected to average 29.4 million bbl/d, then rise to 30.1 million bbl/d in 2010. In addition, EIA expects that OPEC production of non‐crude liquids will rise substantially next year, growing by 660,000 bbl/d in 2009 and by 870,000 bbl/d in 2010, due to increasing condensate and natural gas production.

The combination of lower demand for OPEC crude oil, increasing production of non-crude liquids, and the capacity expansions expected in several OPEC countries means that surplus production capacity could increase dramatically over the next 2 years. OPEC surplus production capacity could average 4.3 million bbl/d in 2009, eventually exceeding 5 million bbl/d by the end of 2010. By comparison, OPEC surplus production capacity ranged from 1 to 2 million bbl/d over the past 5 years. The lack of surplus production capacity was a crucial factor during the run-up in oil prices through the first half of 2008. If OPEC does hold 4 to 5 million bbl/d of surplus production capacity over the next 2 years, this could act to cushion the world oil market and help mitigate the price effect of perceived or actual supply disruptions.

Inventories. Preliminary data indicate that OECD commercial inventories stood at 2.58 billion barrels at the end of 2008, equivalent to 52 days of forward cover, above average levels for that time of year. Measured as days of forward cover, OECD commercial inventories are projected to remain above average levels through the end of 2010. High crude inventories in some markets, along with a growing use of floating storage, are signs that the oil market is well supplied. Along with ample OPEC surplus production capacity, high commercial inventories should help mitigate any strong upward price pressures.

U.S. Petroleum

Consumption. Total petroleum products consumption in 2008 declined by almost 1.2 million bbl/d, or 5.8 percent, from the 2007 average, the largest annual decline since 1980. The major factors behind the fall in consumption were a rapid rise in retail prices to record levels during the first half of 2008 followed by a weakening economy in the second half. Motor gasoline consumption in 2008 declined by 320,000 bbl/d, or 3.4 percent. Despite the cold weather that gripped much of the Lower-48 States in December, distillate fuel consumption in 2008 fell by 5.4 percent from the previous year as a result of precipitous declines in transportation consumption of diesel fuel. Major reductions in airline capacity during the fourth quarter contributed to the 100,000-bbl/d, or 6.2-percent, drop in jet fuel consumption. Total petroleum products consumption in 2009 is projected to fall by a further 460,000 bbl/d, or 2.4 percent, because of continued economic weakness. Consumption of both motor gasoline and distillate fuel are projected to decline by about 100,000 bbl/d each. Jet fuel is forecast to fall by a further 60,000 bbl/d. The expected economic recovery in 2010 is projected to boost total petroleum products consumption by 220,000 bbl/d, or 1.1 percent.

Production. In 2008, domestic crude oil production averaged 4.95 million bbl/d, down by 110,000 bbl/d from 2007. However, in 2009, domestic output is projected to increase by about 400,000 bbl/d to an average of 5.35 million bbl/d. This would be the first increase in production since 1991. Output is projected to rise by a further 130,000 bbl/d in 2010. Contributing to the increases in output are the Gulf of Mexico Thunder Horse platform, which is coming on stream now, and the Tahiti platform, expected to come on stream later this year.

Prices. WTI prices averaged almost $100 per barrel in 2008, with daily spot prices ranging from almost $150 per barrel in early July to about $30 per barrel towards the end of the year. Under current economic and world crude oil supply assumptions, WTI prices are expected to average $43 per barrel in 2009 and $55 per barrel in 2010. The possibility of a milder recession or faster economic recovery, lower non-OPEC production because of the current low oil prices and financial market constraints, and more aggressive action to lower production by OPEC countries could lead to a faster and stronger recovery in oil prices.

Regular-grade gasoline prices are projected to average $1.95 per gallon in 2009 and $2.19 per gallon in 2010. Because of lower motor gasoline consumption, refining margins for gasoline are expected to remain low for much of 2009 but are expected to increase slightly in 2010 as consumption begins to recover.

On-highway diesel fuel retail prices, which averaged $3.79 per gallon in 2008, are projected to average $2.28 per gallon in 2009 and $2.55 in 2010. The expected continuation of the decline in diesel fuel consumption in the United States this year as well as a slowing of the growth in distillate fuel usage outside the United States are projected to result in a narrowing of refining margins for distillate throughout the forecast.

Natural Gas



Consumption. Total natural gas consumption is projected to decline by 1.3 percent in 2009 and then increase by 0.6 percent in 2010. The expectation of limited weather-driven consumption growth in the residential and commercial sectors in 2009 is outweighed by the implications of continued economic weakness in the industrial and electric power sectors. Consumption in the industrial and electric power sectors is expected to decline by 5.1 and 1.0 percent, respectively, in 2009. Consumption growth in 2010 remains largely dependent upon the timing and pace of economic recovery. Based on current assumptions, 2.2-percent growth in the electric power sector combined with slight growth in the residential and industrial sectors are all expected to contribute to 2010 consumption growth.



Production and Imports. Total U.S. marketed natural gas production is expected to rise slightly in 2009 and fall by 1.1 percent in 2010. The dramatic decline in drilling activity, as total working natural gas rigs have declined by more than 31 percent since August 2008, is expected to contribute to lower production during the second half of 2009. Despite the cutback in drilling activity, the current outlook suggests that some production curtailments may be necessary during the latter part of 2009 in order to balance the market. Nevertheless, this year’s marketed production from the Lower-48 non-Gulf of Mexico (GOM) is expected to increase by 1.1 percent due to the low operating cost of wells currently in use and the lagged effect of aggressive drilling programs during the latter part of 2008. In contrast, the natural decline in production from existing fields and long-term decline in drilling activity are expected to lead to a 6.4-percent decrease in production in the Federal GOM this year. In 2010, annual production is projected to decline relative to 2009 in the Federal GOM and Lower-48 non-GOM by 6.3 and 0.6 percent, respectively.



U.S. imports of liquefied natural gas (LNG) are expected to reach about 369 billion cubic feet (Bcf) in 2009, a slight increase over the volume received in 2008. Shipments of LNG to the United States this year will be affected by the timing of supply additions in Russia, Norway, Qatar, and Yemen and the status of global natural gas inventories in LNG-consuming regions. In 2010, U.S. LNG imports are projected to be about 463 Bcf.



Inventories. On January 30, 2009, working natural gas in storage was 2,179 Bcf. Current inventories are now 17 Bcf above the 5-year average (2004–2008) and 60 Bcf above the level during the corresponding week last year. Storage inventories are expected to finish the 2009 withdrawal season (March 31, 2009) at about 1.5 trillion cubic feet (Tcf), roughly 100 Bcf above the previous 5-year average for that time. This fall, inventories are expected to approach the previous high of 3,565 Bcf recorded at the end of October 2007.



Prices. The Henry Hub spot price averaged $5.40 per Mcf in January, $0.60 per Mcf below the average December spot price. For all of 2008, the Henry Hub spot price averaged $9.13 per Mcf. Despite colder-than-normal weather last month, prices continued downward in response to the ongoing drop in natural gas demand. Natural gas prices in 2009 are expected to be largely driven by the extent of the supply response to the persistence of sluggish consumption in light of the current economic downturn. Prices are expected to remain weak as inventories build toward capacity this fall. A warmer summer or faster economic recovery than anticipated could push consumption and prices higher than expected. Prices are projected to recover in 2010 as economic growth contributes to an increase in demand. The Henry Hub spot price is expected to average $5.01 per Mcf in 2009 and $5.93 per Mcf in 2010.



Electricity



Consumption. Total electricity consumption is projected to decline by 0.8 percent in 2009, including an expected decline of nearly 5 percent in industrial sector electricity sales. Total electricity consumption is expected to grow by 1.3 percent in 2010 as economic recovery boosts sales of electricity to the residential and commercial sectors.



Prices. Residential electricity prices, which increased by an estimated 6.5 percent last year, are projected to rise at lower-than-normal annual rates of about 2 percent in 2009 and 2010. Industrial electricity prices are expected to increase by just 1 percent in 2009 after having grown by 10 percent last year.



Coal



Consumption. Coal consumption in the electric-power-sector grew by 1.3 percent during the first half of 2008, but a significant decline in the second half of 2008 caused annual electric-power-sector coal consumption to fall by 0.5 percent in 2008. The economic slowdown in 2009 will lead to a decline in electricity consumption, and this factor combined with projected increases from other generation sources (nuclear, petroleum, and wind) will lead to a 1.2-percent decline in electric-power-sector coal consumption. An expected increase in electricity consumption of 1.3 percent in 2010 will lead to a 1.8-percent increase in electric-power-sector coal consumption. Consumption growth in the coke plant sector is estimated to have been flat in 2008 but is expected to fall by 11 percent in 2009 and by 5.7 percent in 2010 due to the economic slowdown. Retail and other industrial sector coal consumption is estimated to have declined by 2.2 percent in 2008 and is expected to decline by an additional 13.8 percent in 2009. Retail and other industrial sector coal consumption growth is projected to be 3.5 percent in 2010.



Production. A significant increase in coal exports in 2008 contributed to a 2.1-percent increase in coal production. Production is expected to fall by 4.4 percent in 2009 as lower total domestic coal consumption is combined with declines in exports and an increase in imports. Production is projected to increase by 2.5 percent in 2010 as domestic consumption and exports increase with an improving economy.



Exports. Strong global demand for coal and supply disruptions in several key coal-exporting countries (Australia, South Africa, and China), spurred a 38-percent increase in U.S. coal exports in 2008. Reductions in global coal demand, coupled with the return to normal supply conditions in other major coal-producing and exporting countries, are expected to reduce U.S. coal exports by about 10 million short tons, a 11.7-percent decrease, in 2009. The improving global economy will spur global coal demand in 2010 and this will lead to a projected 12-percent increase in exports.



Prices. Despite record increases (some well over 100 percent) in spot prices for several types of coal, the average delivered coal price to the electric power sector is estimated to have increased by 16 percent in 2008. Although the rise in spot prices did contribute to the increase in the cost of coal delivered to the electric power, the rise in transportation costs was the primary reason for the cost increase. Declines in electricity demand and lower transportation costs should see the delivered coal price remain flat in 2009. The delivered coal price to the electric power sector is projected to increase by 1.3 percent in 2010 to $2.09 per million British thermal units.

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Old 02-10-2009, 05:23 PM
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Another good post.


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Old 02-10-2009, 05:40 PM
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now i'm starting to worry...the work in the gulf has slowed down dramatically,my company has only three boats out of 14 working ( out of their gulf fleet). here in port fourchon there are many boats off charter.
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Old 02-10-2009, 07:44 PM
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so oil prices hit a 150/barrel because of greedy traders,and speculators?
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Old 02-10-2009, 11:48 PM
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Quote:
Originally Posted by DevilDawg3097
so oil prices hit a 150/barrel because of greedy traders,and speculators?

Yes Sir, it was big game of hot potato.
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Old 02-11-2009, 12:10 AM
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Great read...the whole surplus thing thing is interesting, I like the fact that america is trying to be more self sufficient.
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Old 02-11-2009, 08:38 PM
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Quote:
Originally Posted by andrew heywood
Great read...the whole surplus thing thing is interesting, I like the fact that America is trying to be more self sufficient.
We're working on it... It's going to take a long time, of course. But, USA is still (relatively) young. There are a LOT of technologies coming out in the recycling sector that is going to give us a "kick in the pants".... it's going to start moving fast in the next few months. The Eastern world is far ahead of us, but we are moving quickly to catch up.

...... Did you know there are VERY few "landfills" in Europe? EVERYTHING (almost) is recycled or re-used. Germany and Austria are very good at this. We need to get there... and we will.
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Old 05-12-2009, 02:30 PM
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Short-Term Energy Outlook

May 12, 2009 Release



To see details of this forecast update, go to site:

http://www.eia.doe.gov/emeu/steo/pub/contents.html

Highlights



Energy prices rose in early May following reports suggesting that the U.S. economy may have reached a turning point in the current recession, at least in some sectors. Near-term prices in this Outlook, however, remain somewhat below market prices as of its release date given that prospects for a global economic turnaround remain highly uncertain. EIA’s forecast is based on a macroeconomic outlook that assumes the U.S. and global economies begin to stabilize in the coming months and show signs of recovery late in 2009 and into 2010.


The price of West Texas Intermediate (WTI) crude oil is expected to remain relatively flat for the remainder of 2009, averaging about $55 per barrel over the second half of 2009. Assuming a modest economic improvement next year, WTI prices are expected to average about $58 in 2010.


During this summer driving season (April through September), regular gasoline retail prices are projected to average $2.21 per gallon, down about $1.60 from last summer. The annual average regular-grade gasoline retail price in 2009 is expected to be $2.12 per gallon, increasing to an average of $2.30 in 2010. The annual average diesel fuel retail prices are expected to be $2.26 and $2.48 per gallon, respectively, in 2009 and 2010.


The Henry Hub natural gas spot price is projected to average $4.06 per thousand cubic feet (Mcf) in 2009, down from an average of $9.13 per Mcf in 2008. Then, buoyed by modest economic growth next year, the price is expected to increase to an average of about $5.21 per Mcf in 2010. The projected steep decline in industrial output this year is expected to reduce industrial natural gas consumption by 8 percent, resulting in a 1.9-percent decrease in total annual consumption of natural gas. Natural gas consumption in the electric power sector, however, is projected to increase by 2.1 percent since lower natural gas prices are expected to back out some coal consumption in this sector. (See this month’s supplemental report, The Implications of Lower Natural Gas Prices in the Electric Power Sector).


Global Petroleum




Overview. EIA is currently projecting a weaker global oil market for 2009 than anticipated in last month's assessment. Expectations of global economic recovery and a resultant increase in demand were offset by initial data for the first quarter showing high oil inventories, weak consumption, and higher-than-expected production. Price increases will likely be muted by the substantial surplus production capacity held by members of the Organization of the Petroleum Exporting Countries (OPEC), along with very high level of inventories among members of the Organization for Economic Cooperation and Development (OECD). The expectation that prices should rise in 2009-2010 because of future economic growth will need to be tempered with the current market reality of this supply overhang. The main downside risk to this Outlook’s oil price forecast remains a prolonged global economic slump, as well as the possibility of reduced compliance with OPEC production targets in the months ahead.



Consumption. World oil consumption remains weak because of the global economic downturn. Based on revised data and a re-estimation of the impact of the economic slowdown on oil consumption, EIA has reduced its forecast for world oil consumption from the fourth quarter of 2008 through the end of the forecast period. World oil consumption is now projected to fall by 1.8 million barrels per day (bbl/d) in 2009, a decline that is 0.4 million bbl/d larger than the decline projected in last month’s Outlook. The forecasts for Asia and the Former Soviet Union (FSU) show the largest revisions. In total, OECD oil consumption is expected to fall by nearly 2 million bbl/d in 2009, with oil consumption in Japan alone expected to fall by over 0.5 million bbl/d in 2009. Partially offsetting declining OECD oil consumption is a growth of 0.2 million bbl/d in non-OECD consumption, particularly in the Middle East, China, and India. World oil consumption is expected to grow by 0.7 million bbl/d in 2010, on the back of a rebound in global economic activity next year.



Non-OPEC Supply. EIA has revised projected non-OPEC supply growth in 2009 upward to 100,000 bbl/d. Recent data indicate that production in the first quarter of 2009 was higher than expected in the North Sea, FSU, and Latin America, although much of the revision for Latin America reflects a re-evaluation of seasonal ethanol production in Brazil. Total liquids production from Norway and offshore United Kingdom was 140,000 bbl/d higher in the first quarter than forecasted from last month. Russia tallied a year-over-year increase in its oil production in March, the first such increase in the past 6 months and only the second such increase since November 2007. Non-OPEC supply is expected to increase by a modest 45,000 bbl/d in 2010, due to increasing production from Brazil, the United States, and the FSU.

OPEC Supply. The current weakness in global oil markets is driven not only by demand weakness, but also by additional supplies from both non-OPEC and OPEC members. Crude oil production by OPEC (including Iraq) in the first quarter averaged 28.7 million bbl/d, roughly 3 million bbl/d below third-quarter 2008 levels. In addition, production of other petroleum liquids outside of the quota system, such as natural gas liquids, is projected to continue growing. OPEC will meet again on May 28 to assess market conditions and production targets. EIA expects that total OPEC petroleum liquids production will average 33.5 million bbl/d for the year, some 2 million bbl/d below 2008 levels, and could reach 34.4 million bbl/d in 2010. Surplus crude oil production capacity in OPEC, which has increased from an estimated 1 million barrels in mid-2008 to 4.3 million barrels in April 2009, is projected to remain relatively high over the forecast period, exceeding 5 million bbl/d in 2010.

Inventories.
Revised data indicate that OECD commercial inventories at year-end 2008 stood at 2.7 billion barrels. At 57 days of forward cover, OECD commercial inventories were well above average levels for that time of year. Preliminary estimates suggest that OECD commercial inventories increased by 34 million barrels during the first quarter, reaching 60 days of forward cover. The United States was mostly responsible for this counter-seasonal build in OECD commercial inventories, with other OECD-member commercial stocks largely unchanged during that period. EIA estimates there are also an additional 130 million barrels of crude oil in floating storage, which we take into consideration in our oil market outlook.

U.S. Crude Oil and Liquid Fuels

Consumption. Total consumption of liquid fuels and other petroleum products averaged 19.4 million bbl/d in 2008, down nearly 1.3 million bbl/d from 2007. Based on the prospects of a continuing weak economy, consumption is projected to shrink by an additional 570,000 bbl/d in 2009, led by a 200,000-bbl/d fall in distillate fuel consumption. The assumed gradual economic recovery in 2010 is expected to contribute to a 250,000-bbl/d increase in total liquid fuels consumption. Having fallen by 320,000 bbl/d last year, motor gasoline consumption is projected to increase slightly in 2009 and then rise by a further 70,000 bbl/d in 2010, or 0.7 percent, as continuing high unemployment constrains increases in driving activity. Distillate consumption in 2010 is projected to rise by only 50,000 bbl/d, reflecting a weak recovery in industrial activity.

Production.
Total domestic crude oil production averaged 4.96 million bbl/d in 2008, down from 5.06 million bbl/d in 2007. Crude oil production is projected to increase to an average of 5.20 million bbl/d in 2009 and 5.33 million bbl/d in 2010. Contributing to the increases in output are the Gulf of Mexico Thunder Horse and Tahiti platforms.



Prices.
WTI crude oil prices, which averaged $99.57 per barrel in 2008, are projected to average $52 per barrel in 2009 and $58 per barrel in 2010. These prices are about $1 per barrel and $5 per barrel, respectively, below those projected in last month’s Outlook. However, a stronger-than-expected economic recovery or lower non-OPEC production (due to low oil prices, financial market constraints, or more aggressive action to cut production by OPEC countries) could lead to a faster and stronger rise in oil prices. As always, energy price forecasts are highly uncertain. Both recent experience and the sizable participation in near-term crude oil futures options contracts at strike prices that are significantly different from current futures market prices clearly demonstrate that crude oil prices can move within a wide range in a relatively short period.

EIA projects that regular-grade motor gasoline retail prices, which averaged $3.26 per gallon in 2008, will average $2.12 per gallon this year, down 4 cents per gallon from last month’s Outlook projection. Regular-grade gasoline retail prices are projected to rise to $2.30 per gallon in 2010, 12 cents lower than projected in the previous Outlook. These projections indicate that total gasoline margins, which had declined last year as a result of weakness in gasoline consumption and growth in ethanol supplies, are expected to stabilize, albeit at low levels, as consumption slowly recovers and increases in ethanol supplies moderate.

Diesel fuel retail prices, which averaged $3.80 per gallon in 2008, are projected to average $2.26 per gallon in 2009, down 4 cents per gallon from the previous Outlook. Diesel fuel retail prices are projected to average $2.48 per gallon in 2010, down 21 cents per gallon from the previous Outlook.

Natural Gas



Consumption. Total natural gas consumption is projected to decline by 1.9 percent in 2009 and then increase slightly in 2010. Weak economic conditions leading to significantly lower natural gas consumption in the industrial sector are expected to be the main source of the dip in total consumption this year. The projected increase in natural gas use in the electric power sector offsets some of this decline. Lower relative natural gas prices compared with coal, particularly in the Southeast, are expected to induce higher utilization of natural-gas-fired electric generation capacity in the near-term and lead to a consumption increase of 2.1 percent in the electric power sector this year. Natural gas consumption is expected to decline slightly in the residential and commercial sectors this year. Similar to other fuels across the energy market, the outlook for natural gas consumption in 2010 is highly contingent upon the timing and pace of economic recovery. Under current assumptions, consumption growth in the electric power sector and a slight recovery in the industrial sector are expected to contribute to a small increase in total consumption for the year, despite minor consumption declines in the residential and commercial sectors due to the expectation of 0.8 percent fewer heating degree-days than the previous year.



Production and Imports. Total U.S. marketed natural gas production is expected to decline by 1.0 percent in 2009 and by 2.8 percent in 2010. As a result of poor economic conditions and lower natural gas prices, total working natural gas rigs have declined by 54 percent since last August. The erosion of drilling activity combined with production curtailments in response to current and projected low prices and high inventory levels are expected to cause natural gas production in the lower-48 non-Gulf of Mexico (GOM) to decrease by about 1.6 percent in 2009. Conversely, marketed production from the Federal GOM is expected to increase by 3.4 percent in 2009 due to the return of facilities damaged by Hurricanes Gustav and Ike as well as the start-up of new production associated with offshore oil projects. Despite expectations of higher prices next year, the lagged effects of the downturn in drilling this year and the natural decline in productivity from existing wells are expected to contribute to lower production in both the lower-48 non-GOM and Federal GOM regions in 2010.



Expected weak natural gas demand in the liquefied natural gas (LNG)-consuming countries of Asia and Europe, the startup of new liquefaction capacity, and limited natural gas storage capacity in countries that typically rely on LNG are expected to increase the availability of LNG for the United States. U.S. LNG imports are expected to increase from 350 billion cubic feet (Bcf) in 2008 to about 500 Bcf in 2009 and 650 Bcf in 2010. However, there is significant uncertainty associated with the global LNG balance. U.S. pipeline imports are expected to decline by about 7 percent in 2009 because of the impacts of suspended drilling programs and declining well productivity in Canada.



Inventories.
On May 1, 2009, working natural gas in storage was 1,918 Bcf. Current inventories are now 362 Bcf above the 5-year average (2004–2008), and 491 Bcf above the level during the corresponding week last year. The natural gas working inventory is projected to peak at about 3,635 Bcf at the end of October 2009, exceeding the previous record of 3,565 Bcf reported for the end of October 2007. Over the past 10 years natural gas working inventory has typically reached a maximum level during the first 2 weeks of November, with the earliest seasonal peak reported the week ending October 20, 2006, and the latest peak the week ending November 30, 2001.



Prices. The Henry Hub spot price averaged $3.62 per Mcf in April, $0.46 per Mcf below the average spot price in March, as consumption has flagged amidst the drop in economic activity. No significant rise in average spot prices is expected until cooler temperatures increase the demand for space heating in the fall. While the seasonal boost in natural gas consumption is expected to add some strength to prices, robust storage levels are expected to limit any significant upward price movement through the winter. However, as the expected improvement in the economy contributes to demand recovery in 2010, sustained lower production levels could lead to higher prices in the latter part of the forecast period. The Henry Hub spot price is expected to average $4.06 per Mcf in 2009 and $5.21 per Mcf in 2010.



Electricity



Consumption. The drag on industrial retail sales of electricity as a result of the ongoing recession is expected to decrease total electricity consumption by 0.8 percent this year. Consumption is projected to return to a more normal growth rate of 1.5 percent in 2010.



Prices. The increased cost of constructing new generation and transmission facilities has led to rising residential retail electricity prices despite lower power generation fuel costs. As a result, residential electricity prices are projected to increase by 4.4 percent in 2009. The lower fuel costs are expected to be passed through to consumers later in the year, slowing growth in 2010 residential retail prices to 1.9 percent.



Generation. EIA’s preliminary estimates indicate that power generation by natural-gas-fired plants increased by nearly 3 percent in February 2009 from the same month last year while coal generation fell by about 14 percent. This change in the relative generation fuel mix may be a response to the converging generation costs for coal and natural gas. A similar pattern is expected to continue during the rest of 2009, with natural gas generation increasing by 2.9 percent and coal generation falling by 2.8 percent.





Coal



Consumption.
A decline in overall electricity generation, combined with projected increases from natural gas, nuclear, and renewable generation (hydroelectric and wind) sources, are projected to lead to a 2.3-percent decline in coal consumption in the electric power sector. An expected increase in total electricity generation of 1.6 percent in 2010 is expected to lead to a 1.4-percent increase in electric-power-sector coal consumption. Consumption in the coke-plant sector is expected to continue falling over the forecast period (U.S. Coal Consumption Growth).



Production.
Production is expected to fall by 4.9 percent in 2009 in response to lower total domestic coal consumption combined with export declines. Production is projected to increase by 1.0 percent in 2010 as domestic consumption and exports increase with an improving economy (U.S. Annual Coal Production).



Exports. Reductions in global coal demand are expected to reduce U.S. coal exports by about 12 million short tons, a 14-percent decrease, in 2009 but an expected increase in global coal demand is projected to result in a 15-percent increase in exports in 2010.



Prices. The average delivered coal price to the electric power sector increased by more than 17 percent in 2008, to an average of $2.07 per million Btu. Although record increases in spot prices (some well over 100 percent) for several types of coal contributed to the increase in the cost of coal, spot market purchases make up only a small portion of total coal consumed. Instead, a rise in transportation charges was the primary reason for the cost increase last year. Despite declines in electricity demand and lower fuel costs, the annual average delivered coal price, which is primarily dictated by long-term coal contracts, is projected to increase to $2.11 per million Btu in 2009 since current delivered prices were set when contracts were entered into during a period of high prices for all fuels a year or more ago. The average delivered coal price is expected to decline to $1.91 per million Btu in 2010.
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