Short-Term Energy Outlook
July 12, 2011
· World crude oil prices initially fell following the June 23 announcement by the International Energy Agency (IEA) that its member countries would release up to 60 million barrels from strategic reserves but then rose above the pre-announcement levels in late June and early July. Attributing observed price changes since June 23 to the IEA announcement is difficult because other drivers, including changing expectations of world economic and crude oil consumption growth, uncertainty over oil supply disruptions, estimates of OPEC spare production capacity, and other physical and financial factors are continually affecting oil prices. Although the IEA release will provide some additional supply, EIA expects oil markets to tighten through 2012. Given projected world oil demand growth and slowing growth in supply from countries that are not members of the Organization of the Petroleum Exporting Countries (OPEC), the projected U.S. average refiner acquisition cost of crude oil rises from $102 per barrel in 2011 to $108 per barrel in 2012, about $1 per barrel below last month’s Outlook.
· The regular-grade gasoline monthly average retail price fell from $3.91 per gallon in May to $3.68 per gallon in June, reflecting the decline in crude oil prices from their April peak and a recovery from unexpected refinery outages and Mississippi River flooding. EIA expects regular-grade gasoline prices will average $3.62 per gallon and $3.51 per gallon over the third and fourth quarters of 2011, respectively.
· Natural gas working inventories ended June 2011 at 2.5 trillion cubic feet (Tcf), about 8 percent, or 214 billion cubic feet (Bcf), below the 2010 end-of-June level. EIA expects that working gas inventories will build strongly during the summer and approach record-high levels in the second half of 2011. The projected Henry Hub natural gas spot price averages $4.27 per million British thermal units (MMBtu) in 2011, $0.12 per MMBtu lower than the 2010 average. EIA expects the natural gas market to begin tightening in 2012, with the Henry Hub spot price increasing to an average of $4.54 per MMBtu.