– WTI,Brent Price Projection For 2012, 2013 Raised

By Brai Odion-Esene

WASHINGTON (MNI) – The U.S. Energy Information Administration
Tuesday upgraded its expectations on the pace of global oil consumption
this year and next, but warned a potential worsening of the crisis in
Europe and slowing China growth poses “significant” downside risk to oil
prices.

For now, however, the agency in its September Short-Term Energy
Outlook raised its forecasts for the prices of U.S. benchmark crude and
Brent, citing oil market conditions.

“The oil market has tightened in recent months as the seasonal
increase in global demand outpaced supply in August and unplanned
production outages in countries outside of the Organization of the
Petroleum Exporting Countries (OPEC) persist,” it said.

The EIA added that it expects oil markets to begin to loosen as
non-OPEC liquid fuels production outstrips world consumption growth.

“The possibility of a deteriorating economic situation in the
countries of the European Union and slowing growth in China adds
significant downside risk to future prices,” the report said, while on
the other hand “supply disruptions and lower-than-expected supply growth
could raise prices.”

After growing by an estimated 0.8 million barrels a day to
average 88.3 million bpd in 2011, the EIA expects world liquid fuels
consumption to grow by 0.83 million bpd in 2012 to average 89.09 million
bpd, and by 1 million bpd to average 90.1 million bpd in 2013.

In last month’s report, the expectation was for demand to grow by
0.76 million bpd and 0.87 million bpd, respectively, in 2012 and 2013.

The EIA projected the spot price of West Texas Intermediate to
average about $96 a barrel in 2012, up from $94 in August’s report, and
$93 in 2013, up from an expectation of $90 in the previous report.

The EIA also now provides a forecast of Brent crude oil spot
prices, intended to better reflect current oil market conditions.

The EIA projects the price of Brent crude oil to average $112 a
barrel in 2012, up from the $108 estimate in August’s outlook, and $103
in 2013 from the $100 projected last month.

As for gasoline, the EIA said higher crude oil prices, refinery
outages, a pipeline disruption, and concerns over Hurricane Isaac’s
impact on the Gulf Coast contributed to higher gasoline prices during
August.

“EIA expects retail gasoline prices to begin declining later this
month as the gasoline market recovers and transitions from summer-grade
to winter-grade gasoline specifications,” it said.

The agency raised the average regular-gasoline retail price
forecast for the third quarter of 2012 to $3.66 a gallon from $3.49 a
gallon in last month’s Outlook. Gasoline retail prices are forecast to
average $3.58 a gallon over the fourth quarter of 2012 and $3.43 a
gallon in 2013.

With regard to oil supply, the EIA report forecast non-OPEC
production to rise by 500,000 bpd in 2012 — down from last month’s
estimate of 600,000 bpd — and by a further 1.2 million bpd in 2013.

“The largest area of non-OPEC growth is North America, where
production increases by 1.0 million b/d and 0.6 million b/d in 2012 and
2013, respectively, due to continued production growth from U.S. onshore
shale and other tight oil formations and from Canadian oil sands,” the
EIA said.

The agency expects that for the U.S. alone, total crude oil
production will average 6.3 million bpd in 2012, an increase of 0.7
million from last year. Projected U.S. domestic crude oil production
increases to 6.8 million bpd in 2013, the highest level of production
since 1993.

With regards to supply from OPEC, the EIA said it expects the
influential group will continue to produce “more than” 30 million bpd
over the next two years.

It projects that OPEC crude oil production increases by about 1
million barrels a day in 2012 and then by 100,000 bpd in 2013. It
attributed the growth in OPEC supply to increased output by Iraq and the
restoration of Libya oil production to about 1.5 million bpd in August.

As for Iran, the EIA’s outlook is unchanged from last month. It
forecast production falling by about 1 million bpd by the end of 2012
relative to an estimated output level of 3.6 million bpd at the end of
2011, and by an additional 0.2 million bpd in 2013.

The EIA projects that OPEC surplus production capacity will average
2.2 million bpd in 2012 and rise to an average 2.4 million bpd in 2013.

As for natural gas, the EIA expects natural gas consumption to
average 69.8 billion cubic feet a day in 2012, the same as last
month’s forecast. Growth in total natural gas consumption is then
forecast to average 70 Bcf a day in 2013, essentially unchanged from
the EIA August projection of 70.9 Bcf/d.

The EIA said natural gas spot prices averaged $2.84 a MMBtu at
the Henry Hub in August, down $0.11 a MMBtu from the July average.

EIA expects natural gas prices will average $2.65 a MMBtu in
2012, compared to $2.67 a MMBtu expected in August’s Outlook. EIA’s
forecast for 2013 is $3.34 a MMBtu, the same as last month’s report.

** MNI Washington Bureau: 202-371-2121 **

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