EIA Lifts & Tweaks Energy Price/Demand Expectations

The U.S. Energy Information Administration has adjusted its energy use forecasts in an early August update.  Usually we see reports come earlier but this appears to be another adjustment. Covered today are uses and prices of Brent crude, WTI crude, gasoline, corn, coal, ethanol and more. Here is a blurb from each of the new projections:

• Brent crude oil spot prices are expected to average about $103 per barrel during the second half of 2012, about $3.50 per barrel higher than in last month’s outlook but it sees an average of $100 per barrel in 2013.
• West Texas Intermediate (WTI) crude oil spot price discount to Brent crude oil projection is being narrowed from about $14 in the third quarter of 2012 to $9 by late 2013, assuming that world oil-consumption-weighted real GDP grows by 2.8% in 2012 and 2.9% in 2013.
• EIA has increased the average regular gasoline retail price forecast for the third quarter of 2012 to $3.49 per gallon from $3.39 per gallon in last month’s outlook; it sees an average of $3.53 per gallon in 2012 and $3.33 per gallon in 2013.
• U.S. total crude oil production is now put at 6.3 million barrels per day in 2012, up 0.6 million from last year and also the highest production since 1997. Projected U.S. domestic crude oil production increases to 6.7 million in 2013.
• Drought conditions are affecting corn harvests and prices throughout the Midwest, with ethanol production having fallen from 920 thousand bbl/d for the week ending June 8, 2012 to 809 thousand bbl/d for the week ending July 27, 2012. EIA has reduced its 2012 ethanol production forecast from 900 thousand bbl/d (13.8 billion gallons) in last month’s Outlook to 870 thousand bbl/d (13.3 billion gallons). EIA expects ethanol production to recover in the second half of 2013, averaging about 880 thousand bbl/d for the year.
• Natural gas working inventories ended July 2012 at an estimated 3.2 trillion cubic feet, up 17% from the same time last year. The EIA sees the Henry Hub natural gas spot price, which averaged $4.00 per million British thermal units (MMBtu) in 2011, to average $2.67 per MMBtu in 2012 and $3.34 per MMBtu in 2013.
• The cost per KW/hour of electricity was 11.79 cents in 2011 and is expected to now be 11.99 cents in 2012 and 12.09 cents in 2013.
• On coal, the EIA noted, “EIA expects coal consumption in the electric power sector to total 825 MMst in 2012, the lowest amount in 20 years. EIA projects power sector coal consumption will remain flat in 2013 as the effects of higher electric power sector natural gas prices are offset by the weak increase in electricity consumption.”

JON C. OGG