EIA Publishes New Estimates; OPEC Produces Less Oil

The US Energy Information Administration has released its latest Short-Term Energy Outlook, and it does little to raise the dim economic prospects for the rest of 2010 and 2011.

The EIA has lowered its projected real US GDP growth estimate from 3.1% and 2.7% for 2010 and 2011, respectively, to 2.8% and 2.3%. The agency also lowered its global GDP growth estimate from 3.6% to 3.3%.
Spot prices for WTI are expected to remain at $77/barrel through the fourth quarter of 2010 and rise to an average of $82/barrel in 2011. Regular-grade gasoline prices are expected to average $2.69/gallon for the second half of 2010, down $0.07 from the first half of the year. Higher crude prices in 2011 will raise pump prices to $2.90/gallon.

Total global oil production for 2010 is expected reach 85.97 million b/d, up about 1.6 million b/d from 2009. Production is expected to reach 87.01 million b/d in 2011. Consumption in 2010 is expected to average 85.95 million b/d, about 20,000 b/d below production. Consumption in 2011 is expected to surpass production by about 35,000 b/d. That is what is driving the per barrel price up in 2011.
Energy analysis firm Platts today published its estimated OPEC production figures for August. As a group, the cartel produced an estimated 29.11 million b/d, down from 29.22 million b/d estimated in July. High inventory levels and shrinking refining margins are the likely culprits for the reduced production according to Platts.

Natural gas production is expected to reach 61.2 billion cubic feet/day in 2010, declining to 60 billion cubic feet/day, primarily due to low prices for gas which will stifle new drilling. Natural gas consumption in 2010 will rise 4% above 2009 levels, to 65 billion cubic feet/day and remain relatively flat through 2011. Pipeline imports are expected to reach 9.2 billion cubic feet/day in 2010, and LNG imports are expected to total 1.25 billion cubic feet/day. Again, low prices have discouraged imports and there is plenty of domestic natural gas to meet demand.
Natural gas spot prices will average $4.54/million BTUs in 2010, up $0.60/million BTUs from a year ago, but down -$0.15/million BTUs from the EIA’s earlier estimates.

Electricity generation from coal rose 6.1% in the first half of 2010 and electricity generated from natural gas rose 4.7%. The projected growth for electricity sales to the industrial sector are expected to rise 6% in 2010 before slowing to a growth rate of just 0.2% in 2011.
The close tie between energy use and economic growth sometimes makes it difficult to tell the cart and the horse. The most sobering take-away from these numbers is that if the economy were getting better, would global energy supply be able to keep up? It could be some time before we find out the answer to that question.

Paul Ausick