The Energy Information Administration released its monthly outlook for September last week with only slight revisions to its previous forecast issued in August, including a modest bump up in its projection for retail diesel fuel prices for this year and in 2010. Analysts with the federal agency also adjusted their estimates higher for retail gasoline prices in 2010, while projecting a return in global oil demand growth next year after lower year-on-year consumption rates in 2008 and 2009.

The Energy Information Administration expects retail diesel fuel to average $2.47 gal this year, a penny above its prior month projection, and to average $2.88 gal in 2010, up 4cts from August estimates. Analysts with the agency said amid an expected increase in demand for distillate fuels as the winter heating season begins, it projects diesel fuel retail prices will increase over the next few months to average $2.74 gal during the fourth quarter. Retail diesel fuel averaged $2.63 gal in August.

Regular-grade gasoline sold at retail outlets across the United States is expected to average monthly at $2.56 gal during the fourth quarter, down from a $2.62 gal average for August and September. For all of 2009, the average is projected at $2.34 gal for retail regular-grade gasoline in the U.S., while “[h]igher projected crude oil prices in 2010—about $12 per barrel, or 29 cents per gallon, higher than the 2009 average—increase regular-grade gasoline prices to an average of $2.70 per gallon next year,” said the EIA.

“Equity-market and exchange-rate expectations continue to be cited by market analysts as proximate causes of oil-price behavior, in addition to changing expectations of global oil consumption growth,” said the beltway analysts.

They project West Texas Intermediate crude oil to average about $70 bbl in the fourth quarter and $69 bbl for the second half of the year, well above the first quarter price average of $43 bbl.

“This projection is largely unchanged from last month's Outlook and reflects the view that an expected economic upturn will restore oil demand growth and gradually work off the surplus oil inventories,” said the EIA.

The EIA said that, based on monthly averages, motor gasoline consumption in June posted year-over-year growth for the first time since September 2007 and “continues to grow over year-ago levels through the forecast.”

The federal agency expects total consumption of liquid fuels and other petroleum products to be down 800,000 bpd or 4 percent this year compared with 2008. The lost demand was concentrated during the first half of the year, with the EIA pointing to a slower loss in consumption during the final six months of 2009 at 300,000 bpd or 1.6 percent “as economic recovery begins to take hold.”

In 2010, a “modest economic recovery” helps to grow demand, with the EIA projecting total liquid fuels consumption at 260,000 bpd or 1.4 percent increase. Motor gasoline consumption is expected to increase by 60,000 bpd in 2010, while distillate fuel consumption is seen climbing 110,000 bpd or 2.9 percent next year.

The EIA also said it expects world oil consumption to grow year-over-year in the fourth quarter, which would mark the first such growth in five quarters. That estimate assumes that the world economy will begin to recover at the end of this year, led by developing Asian economies.

Global oil consumption is projected to rise by 900,000 bpd in 2010, the EIA said. The estimate is little changed from the agency’s projection issued on Aug. 11.

The EIA said strong demand growth in developing countries will offset a slight decline in consumption by developed countries that make up the Organization for Economic Cooperation and Development.

On supply, the OECD commercial oil inventories stood at 2.74 billion bbl at the end of the second quarter, the EIA said, adding that at 61 days of forward cover, OECD commercial inventories were well above average levels for that time of year.

EIA expects OECD oil inventories to remain at above-average levels throughout the forecast period because of weakness in global oil consumption and continuing contango in the futures market.

Meantime, OPEC crude oil production was estimated at 28.7 million bpd in the second quarter, mostly unchanged from first quarter levels, but down 3.0 million bpd from the peak in the third quarter of 2008.

The combination of higher prices and OPEC’s historical tendency for weaker compliance with production targets over time suggests that OPEC crude oil production could rise over the remainder of the year, unless prices fall sharply from current levels, said the EIA.

The EIA said total non-OPEC crude oil and other liquid fuels supply averaged 50.1 million bpd in the second quarter, up 300,000 bpd year-on-year, mostly because of higher output from South and Central America and from the former Soviet Union. North Sea output fell 300,000 bpd.

In the U.S., EIA projects total U.S. crude oil production to average 5.24 million bpd in 2009 and increase to an average of 5.30 million bpd in 2010. Crude oil production from the new Thunder Horse, Tahiti, Shenzi, and Atlantis Federal offshore fields accounts for about 14 percent of Lower-48 crude oil production in the fourth quarter of 2010.