The Energy Information Administration revised slightly higher its price outlook for retail diesel fuel in 2010, pointing to improved prospects for a global economic recovery that is expected to increase consumption for oil next year. The agency did, however, adjust its global oil demand expectations for 2010 slightly lower than what it showed in November.
In its final Short-term Energy Outlook for 2009, the EIA pushed up by 2cts the price average it anticipates for retail diesel fuel next year to $2.96 gal, saying the fuel will likely average $2.46 gal this year. For retail gasoline, the agency projects a $2.83 gal 2010 average compared with a likely $2.35 gal average this year, while saying higher crude prices will push gasoline towards $3 gal during peak driving demand over the summer.
“In 2010, the refiner cost for crude oil averages about $77 per barrel, or over $17 per barrel (41 cents per gallon) higher than the 2009 average, contributing to an expected $0.48-per-gallon increase in regular-grade gasoline prices to an average of $2.83 per gallon next year,” said EIA.
The agency expects the price of West Texas Intermediate crude oil will average about $76 gal this winter, October through March.
“The forecast for the monthly average WTI price dips to $75 early next year then rises to $82 per barrel by December 2010, assuming U.S. and world economic conditions continue to improve,” the agency reported.
EIA’s forecast assumes that U.S. real gross domestic product grows by 1.9 percent in 2010 and world oil consumption weighted real GDP grows by 2.6 percent.
Residential heating oil prices this winter, October through March, are projected to average $2.77 gal, down from estimates at $2.80 gal last month but up from $2.64 gal last winter.
EIA reported total consumption of liquid fuels and other petroleum products will average 18.7 million bpd in 2009, down 800,000 bpd or about 4.1 percent from 2008 levels. During the first half of this year, total consumption fell by almost 1.25 million bpd or 6.3 percent versus the comparable 2008 period - one of the steepest declines on record. The year-over-year projected decline in petroleum consumption slowed to 280,000 bpd or 1.5 percent in the third quarter, although this is in large part due to a 220,000 bpd increase in motor gasoline consumption as high prices and hurricanes Gustav and Ike depressed gasoline consumption last year. Year-over-year total petroleum consumption is 430,000 bpd or 2.2 percent lower in the fourth quarter, as the gains in gasoline consumption return to near zero and warmer weather in the eastern United States reduces heating fuel demand.
The agency said that the modest economic recovery assumed for 2010 partly contributes to an increase in total liquid fuels consumption of 270,000 bpd or 1.4 percent.
The EIA said too that it expects world oil consumption to grow in 2010 by 1.1 million bpd to 85.2 million bpd, down slightly from its estimate last month for a 1.26 million bpd growth. The agency said that countries outside of the Organization of Economic Cooperation and Development or OECD are going to account for most of this projected demand growth next year.
Oil consumption by OECD or developed countries will only grow 100,000 bpd in 2010 despite a projected 270,000 bpd demand increase in the U.S. after a very weak 2009, the agency said.
Meanwhile, oil supply from the Organization of Petroleum Exporting Countries is expected to increase to an average of 29.6 million bpd in 2010 in response to an anticipated rebound in global oil demand. OPEC output for this year is seen averaging 29.1 million bpd, down more than 2.0 million bpd from year-ago levels.
The projections come as OPEC prepares for a meeting on Dec. 22 in Angola that is expected to leave its output quotas unchanged. The EIA says OPEC now “faces a global oil market that has firmed up in response to production cuts that began to take effect in January 2009.”
The EIA report notes that OPEC compliance with those cuts has weakened and global oil inventories remain very high by historical standards. Still, prices are off their lows seen in the first quarter of 2009.
However, the EIA projects non-OPEC supply growth to slow by 200,000 bpd in 2010, largely the result of lower growth in the U.S. and the Former Soviet Union, where increases have been reported in the past.
Non-OPEC oil production for 2009 is expected to average 50.3 million bpd, about 600,000 bpd higher than year-earlier levels.
On inventories, the EIA expects OECD oil inventories to remain above average historical levels throughout the forecast period. OECD commercial oil inventories stood at 2.77 billion bbl at the end of the third quarter, 115 million bbl more than the five-year average.
Inventories are projected to be at 58 days of forward cover at the end of 2009, five days above the five-year average for that time of year, says the report.
