In its Short-Term Energy Outlook—March 2005, the DOE’s EIA raised its forecast average price for West Texas Intermediate (WTI) crude oil for the first quarter of 2005 to about $48.70 per barrel.
This is approximately $13 per barrel higher than in the first quarter of 2004 and a $2 per barrel increase above the 1Q 2005 projection published last month in the Outlook.
EIA projects that WTI prices are likely to remain near the high-to-mid-$40’s (or higher) per barrel range throughout 2005-2006. It is emphasized that oil prices are likely to be sensitive to any incremental supply tightness that appears during periods of peak demand worldwide. Imbalances (real or perceived) in light product markets could cause light crude oil prices (such as WTI) to increase to well above $50 per barrel, as has recently occurred.
The EIA assumed for this forecast that OPEC will not cut production at its next meeting, and than non-OPEC supply growth will somehow average 1.2 million barrels per day over 2005-2006.
World petroleum demand growth during the 2005 and 2006 period is projected to average about 2.5 percent per year, a rate that exceeds expected growth in non-OPEC supply and global refinery capacity. Although this is strong growth, it is down from the 3.4-percent demand growth (2.7 million barrels per day) in 2004. The lower global oil demand growth rate in 2005 and 2006 is attributed to several factors, including the impact of high world oil prices and slower projected Chinese oil demand growth. This month’s Outlook includes upward revisions in the level of expected Chinese oil demand.
U.S. petroleum demand averaged 20.5 million barrels per day in 2004, an increase of 2.4% from 2003.
The release of the report pushed Brent crude futures, the European benchmark, to an all-time high in nominal terms of $53.20 a barrel. The rising oil price also helped propel the Reuters CRB index, which tracks a basket of commodities, to a 21-year high. (Financial Times)