Lower EIA Oil & Energy Demand Projection Tempers Expectations (XOM, BHI, OIH, VLO, CHK, BTU, KOL)

Oil demand is being revised lower in a new forecast by the Energy Information Administration.  The reality is that the demand erosion is modest at a mere 70,000 barrels per day in the United States.  That in turn is taking the average price per barrel expected on the refiner acquisition level down to $112.00 per barrel.  The reality is that this is $10 above a year-ago as an average price, and U.S. oil demand is seen at a 15-year low with gasoline demand at an 11-year low.

Lower demand expectations and a weak market have shares of Exxon Mobil Corporation (NYSE: XOM) down by -2.2% at $82.03 against a 52-week trading range of $67.03 to $88.13.  Baker Hughes Incorporated (NYSE: BHI) has been among the weakest of all large oilfield services players and shares hit a new 52-week low of $39.40 today against a 52-week range of $40.20 to $81.00.  The Market Vectors Oil Services ETF (NYSE: OIH) is down 2% at $38.61 against a 52-week range of $35.80 to $45.14.

The EIA now expects the price of West Texas Intermediate crude oil to average about $106 per barrel in 2012, which is the same as last month’s projection but it is $11 per barrel higher than the average price last year. Transportation constraints from the U.S. midcontinent region remain a reason for the discounting. The EIA further went on to say that it expects WTI prices to remain relatively flat in 2013 around $106 per barrel with an average refiner acquisition cost of crude oil averages $110 per barrel in the United States.  With refining at risk for price spread gaps, Valero Energy Corporation (NYSE: VLO) is down 4.3% at $23.64 against a 52-week trading range of $16.40 to $29.55.

The EIA expects gasoline retail prices at $3.81 per gallon on average in 2012 and $3.73 per gallon in 2013.  The average listed by the EIA was $3.53 per gallon in 2011.

There is a mixed bag for coal producers who have seen their shares battered: “EIA expects electricity generation from coal to decline by about 10 percent in 2012 as generation from natural gas increases by about 17 percent. EIA forecasts that electricity generation from coal will increase by about 7 percent and generation from natural gas fall by 3 percent in 2013 as projected coal prices to the power sector fall slightly while natural gas prices increase, allowing coal to regain some of its power sector generation share.”

Chesapeake Energy Corporation (NYSE: CHK) has not been able to avoid the hangman today with shares down 3.5% at $20.70 against a 52-week range of $20.41 to $35.75 despite announcing some fresh asset sales.

Shares of Peabody Energy Corporation (NYSE: BTU) are down 0.7% at $27.52 and the prior 52-week trading range before today was $27.61 to $68.30.  The Market Vectors Coal ETF (NYSE: KOL) is down 1.4% at $30.89 against a 52-week range of $27.42 to $51.69.

JON C. OGG