In June's Short-term Energy Outlook released on June 8, the Energy Information Administration revised lower its 2010 price expectations for retail gasoline and retail diesel fuel from its Outlook in May, saying the downside adjustments were made because of a lower price outlook for crude. EIA, the statistical arm of the Department of Energy, pressed down its price projection for West Texas Intermediate crude oil, the U.S. crude benchmark, this year due to economic uncertainty.
"EIA has lowered its projections for world oil prices slightly for 2010. Uncertainty about economic growth in China and in the Euro zone has continued to weigh on oil market, and declines in equity markets have led to fears that the economic recovery may not progress as fast as had been hoped," said EIA.
WTI crude oil spot prices averaged less than $74 bbl in May, almost $11 bbl below the prior month's average and $7 bbl lower than the forecast in last month's Outlook. WTI is the U.S. benchmark crude oil.
"Moreover, WTI prices fell further than most other crudes because of record high inventories in Cushing, Oklahoma," which is the New York Mercantile Exchange delivery point. EIA estimates WTI prices will average about $79 bbl over the second half of this year and rise to $84 bbl by then end of next year.
The agency projects WTI spot crude oil prices will average $79 bbl this year and $83 bbl in 2011, both about $3 below the prior month's Outlook.
For regular grade retail gasoline, the EIA projects an average price of $2.79 gal during this summer's driving season, up 35cts from last year but a 15cts drop from the prior month's estimate amid declines in crude oil prices due to economic uncertainty. The summer driving season is defined as the period between April 1 and Sept. 30.
The agency projects regular grade gasoline retail prices will average $2.76 gal this year and $2.92 gal in 2011, down 10cts and 6cts, respectively, from last month's Outlook.
For on-highway retail diesel fuel, the EIA projects a $2.96 gal average for this year, down 9cts from prior month estimates, which compares with a $2.46 gal average in 2009. For 2011, the agency predicts the fuel will average $3.11 gal, also down 9cts from a month ago.
After an 810,000 bpd drop in U.S. liquid fuels consumption in 2009, which was the fourth consecutive annual decline, EIA said consumption is beginning to show signs of recovery. Total liquid fuels consumption, which declined by an average 20,000 bpd in the first quarter versus the same period a year ago is expected to rise 490,000 bpd for the current quarter compared with last year.
Motor gasoline consumption for the current quarter is seen rising 70,000 bpd and distillate consumption is expected to gain 220,000 bpd.
Projected total liquid fuels consumption is expected to grow by an average 230,000 bpd this year and 200,000 bpd in 2011 as all of the major petroleum products register consumption growth.
The agency forecasts that liquid fuel net imports, including both crude oil and refined products, which declined by 1.4 million bpd in 2009, will decline by an additional 110,000 bpd in 2010. In 2011, project total liquid fuel net imports increase by 90,000 bpd.
The EIA projects ethanol production, which averaged 700,000 bpd in 2009, will increase to an average 860,000 bpd in 2010 and 890,000 bpd in 2011.
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