WASHINGTON (MNI) – The following are excerpts from the Energy
Information Administration’s Short-Term Energy Outlook published
Tuesday:

Highlights

* EIA projects U.S. real gross domestic product (GDP) will grow by
3.0 percent and world real oil-consumption-weighted GDP will increase by
3.6 percent in 2010, both of which are 0.2 percent higher than in the
previous Outlook. The 2011 forecast for real GDP growth is at 2.9
percent and 3.7 percent for the United States and the world,
respectively.

* The more optimistic economic growth forecasts lead to an
increase of about $2 per barrel in EIA’s projections for West Texas
Intermediate (WTI) crude oil spot prices compared with the prior
Outlook. EIA expects WTI prices to average about $84 per barrel during
the second half of this year, rising to $87 by the end of next year.

* To date, energy production, shipments, and prices have not been
significantly affected by the oil spill following the April 20 explosion
aboard the Deepwater Horizon drilling rig and its subsequent loss in the
Gulf of Mexico, 50 miles off the Louisiana coast. EIA and other offices
in the Department of Energy are closely monitoring the situation and its
effects on the energy sector (see Deepwater Horizon Situation Report).

* EIA forecasts that regular-grade motor gasoline retail prices
will average $2.94 per gallon during this summer’s driving season (the
period between April 1 and September 30), up from $2.44 per gallon last
summer. The summer gasoline price forecast is up very slightly ($0.02)
from last month.

* EIA expects the Henry Hub natural gas spot price to average
$4.48 per million Btu (MMBtu) this year (up $0.04 per MMBtu from last
month’s forecast), a $0.53-per-MMBtu increase over the 2009 average.
EIA expects the Henry Hub spot price to average $5.34 per MMBtu in 2011.

* The annual average residential electricity price changes only
moderately over the forecast period, averaging 11.6 cents per
kilowatthour (kWh) in 2010, up from 11.5 cents per kWh in 2009, and then
rising to 11.9 cents per kWh in 2011.

* Estimated carbon dioxide (CO2) emissions from fossil fuels,
which declined by 7.0 percent in 2009, are expected to increase by 0.6
percent and 1.6 percent in 2010 and 2011, respectively, as economic
growth spurs higher energy consumption.

—

Crude Oil and Liquid Fuels Overview.

EIA’s assessment of global economic growth, global oil demand, and
world oil prices are all slightly higher than in last month’s Outlook.
Expectation of a somewhat more robust global economic recovery supports
the updated price forecast, particularly if the Organization of the
Petroleum Exporting Countries (OPEC) continues to remain satisfied with
its supply targets as global oil consumption continues to grow. The
most important downside risk to this forecast is lower-than-expected
economic growth.

Global Crude Oil and Liquid Fuels Consumption.

EIA projects that world oil consumption will grow by 1.6 million
barrels per day (bbl/d) in 2010, slightly higher than in last month’s
Outlook, and also by 1.6 million bbl/d in 2011. This revision for 2010
follows an update of EIA’s assumptions for growth in world real
oil-consumption-weighted GDP, which is now assumed to rise on average
about 3.6 percent per year over the forecast period. The growth in oil
consumption is expected to be largely concentrated in the Asia-Pacific
and Middle East regions (World Liquid Fuels Consumption Chart).

Non-OPEC Supply.

Non-OPEC supply is projected to increase by 660,000 bbl/d in 2010,
about 60,000 bbl/d more than in last month’s Outlook. Nearly all of the
revision in 2010 non-OPEC supply growth is due to higher expected
production of natural gas liquids and fuel ethanol in the United States.
The largest source of growth in 2010 is the United States, followed by
Brazil, Azerbaijan, and Kazakhstan. Offsetting projected supply growth
in 2010 are further declines in mature basins in Mexico, the United
Kingdom, and Norway. EIA expects non-OPEC supplies to fall by 200,000
bbl/d in 2011.

OPEC Supply.

EIA projects that OPEC will only gradually increase its crude oil
production over the forecast period, largely in line with the decision
at its March meeting to leave its production targets unchanged. OPEC
crude oil production increases in the forecast by 0.3 and 0.6 million
bbl/d in 2010 and 2011, respectively, primarily in Angola and Nigeria.
While EIA expects the increase in Angolan production to come from new
capacity additions, higher expected Nigerian production is largely the
result of shut-in capacity coming back online. The countries that have
the bulk of OPEC’s spare capacity (Saudi Arabia, Kuwait, and the United
Arab Emirates) have maintained production at current levels for an
extended period and are expected to continue doing so, barring
significant changes in the world oil market outlook. Surplus crude oil
production capacity does not increase significantly over the forecast
period from first-quarter 2010 levels (OPEC Surplus Crude Oil Production
Capacity Chart). OPEC production of non-crude petroleum liquids, which
are not subject to OPEC production targets, are expected to increase by
0.6 and 0.7 million bbl/d in 2010 and 2011, respectively.

OECD Petroleum Inventories.

EIA estimates that commercial oil inventories held in the
Organization for Economic Cooperation and Development (OECD) countries
stood at 2.70 billion barrels at the end of the first quarter of 2010.
This is equivalent to about 58 days of forward cover, and is roughly 95
million barrels more than the 5-year average for the corresponding time
of year (Days of Supply of OECD Commercial Stocks Chart). Although OECD
oil inventories are still projected to remain at the upper end of the
historical range over the forecast period, they are falling as a result
of a combination of higher oil consumption and OPEC production
restraint.

Crude Oil Prices.

WTI crude oil spot prices averaged $84 per barrel in April 2010,
about $3 per barrel above the prior month’s average and $2 per barrel
higher than forecast in last month’s Outlook. EIA projects WTI prices
will average about $84 per barrel over the second half of this year and
rise to $87 by the end of next year, an increase of about $2 per barrel
from the previous Outlook (West Texas Intermediate Crude Oil Price
Chart). Energy price forecasts are highly uncertain, as history has
shown. Prices for near-term futures options contracts suggest that the
market attaches significant likelihood to the movement of prices over a
wide range within a relatively short period.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MI$OI$,MAUDS$]