U.S. iquid Fuels Supply and Imports. Domestic crude oil production, which increased by 150,000 bbl/d in 2010 to 5.51 million bbl/d, declines by 110,000 bbl/d in 2011 and by a further 130,000 bbl/d in 2012 (U.S. Crude Oil Production Chart). The 2011 forecast includes production declines in Alaska of 60,000 bbl/d in 2011 and an additional decline of 10,000 bbl/d in 2012 because of maturing Alaskan oil fields. EIA expects production from the Federal Gulf of Mexico (GOM) to fall by 240,000 bbl/d in 2011 and by a further 200,000 bbl/d in 2012. These production declines in Alaska and the GOM are partially offset by projected increases in lower-48 non-GOM production of 190,000 bbl/d and 70,000 bbl/d in 2011 and 2012, respectively.
Liquid fuel net imports, including both crude oil and refined products, fell from 57 percent of total U.S. consumption in 2008 to 49 percent in 2010, primarily because of the decline in consumption during the recession and rising domestic production. EIA forecasts that liquid fuel net imports will average 9.7 million bbl/d in 2011 and 10.0 million bbl/d in 2012, comprising 50 percent and 52 percent of total consumption, respectively.
EIA expects slow growth in fuel ethanol production over the next 2 years. Ethanol production increases by a projected 40,000 bbl/d, to 900,000 bbl/d in 2011, followed by an additional 10,000 bbl/d increase in 2012.
U.S. Petroleum Product Prices. Projected regular-grade gasoline retail prices rise from a national average of $2.78 per gallon in 2010 to $3.56 per gallon in 2011 and $3.57 per gallon in 2012, although there is considerable variation within and between regions. The forecast for on-highway diesel fuel retail prices, which averaged $2.99 per gallon in 2010, averages $3.81 per gallon and $3.82 per gallon in 2011 and 2012, respectively.
The projected monthly average regular gasoline price peaks this year at $3.75 per gallon in June. New York Harbor RBOB (reformulated gasoline blendstock for oxygenate blending) futures contracts for July 2011 delivery over the 5-day period ending March 3 averaged $2.97 per gallon and implied volatility averaged 33 percent. The probability the RBOB futures price will exceed $3.30 per gallon (consistent with a U.S. average regular gasoline retail price above $4 per gallon) in July 2011 is about 25 percent.
Natural Gas
U.S. Natural Gas Consumption. EIA expects that total 2011 natural gas consumption will remain close to 2010 levels. Forecast residential and commercial consumption in 2011 should be lower than reported 2010 levels by 1.2 percent and 2.7 percent, respectively, reflecting changes to EIA's methodology for collecting and reporting natural gas consumption data (see Changes in Natural Gas Monthly Consumption Data Collection and the Short-Term Energy Outlook) that were implemented in the middle of 2010 to provide more accurate data on seasonal patterns of natural gas use. Industrial consumption rises from 18.1 billion cubic feet per day (Bcf/d) in 2010 to 18.8 Bcf/d in 2011 as the natural-gas-weighted industrial production index increases 4.0 percent year-over-year.
Total consumption grows 1.0 percent in 2012, from 66.6 Bcf/d to 67.2 Bcf/d. Increases in natural gas consumption in the electric power sector and the industrial sector are partially offset by slight declines in residential and commercial consumption. EIA expects electric power sector and industrial sector consumption in 2012 to grow by 2.8 percent and 1.5 percent, respectively.
U.S. Natural Gas Production and Imports. Total marketed natural gas production grew strongly throughout 2010 (4.4 percent), increasing from 59.7 Bcf/d in January to an estimated 63.8 Bcf/d in December. Year-over-year growth in 2011 slows considerably to just 0.8 percent as an increase of 1.0 Bcf/d in the lower-48 States is partially offset by a decline of 0.5 Bcf/d in the GOM.
The latest EIA data for monthly natural gas production in the Natural Gas Monthly show an increase in production in the lower-48 States in December 2010, continuing an increase from the previous month. However, modest declines are expected through 2011 because of a falling gas-directed drilling rig count in response to lower prices. The number of rigs drilling for natural gas, as reported by Baker Hughes Inc., increased from a low of 665 in July 2009 to 973 in April 2010. The natural gas rig count stayed relatively unchanged from April through October 2010. However, since October 2010 the rig count has fallen, dropping to 906 rigs as of February 25. The large price difference between petroleum liquids and natural gas on an energy-equivalent basis contributes to an expected shift towards drilling for liquids rather than for dry gas.
Increasing consumption in 2012, led by strong growth in the electric power sector, contributes to higher prices and to an economic incentive for producers to resume drilling. Total domestic natural gas production increases by 0.9 percent in 2012. Lower-48 production is expected to increase throughout 2012 from 55.0 Bcf/d in January to 57.4 Bcf/d in December. Federal GOM production remains flat in 2012.
EIA expects gross pipeline imports of 8.4 Bcf/d in 2011 and 8.2 Bcf/d in 2012, year-over-year decreases of 5.6 and 2.3 percent, respectively. Projected imports of liquefied natural gas (LNG) average 1.2 Bcf/d in 2011, a 3-percent decrease from 2010 levels. LNG imports in 2012 remain relatively flat. High domestic production combined with high inventories and low U.S. prices relative to European and Asian markets should continue to discourage LNG imports.
U.S. Natural Gas Inventories. On February 25, 2011, working natural gas in storage stood at 1,745 Bcf, slightly below last year's level at this time (U.S. Working Natural Gas in Storage Chart). At the end of the winter heating season (March 31, 2011), EIA expects that about 1,549 Bcf of working natural gas will remain in storage, a downward revision of about 102 Bcf from last month's Outlook. Cold temperatures and production freeze-offs in February contributed to a larger-than-expected draw on inventories. EIA expects that inventories, though somewhat below their 2010 levels for the first half of the year, still will remain relatively robust. Slower growth in production and greater consumption contribute to lower inventories in the second half of 2012.
U.S. Natural Gas Prices. The Henry Hub spot price averaged $4.09 per MMBtu in February 2011, $0.40 per MMBtu less than the average spot price in January 2011 (Henry Hub Natural Gas Price Chart). EIA expects that the Henry Hub spot price will average $4.10 per MMBtu in 2011, a drop of $0.29 per MMBtu from the 2010 average. EIA expects the natural gas market to begin to tighten in 2012, with the Henry Hub spot price increasing to an average of $4.58 per MMBtu.
Uncertainty over future natural gas prices is slightly lower this year compared with last year at this time. Natural gas futures for May 2011 delivery (for the 5-day period ending March 3) averaged $3.98 per MMBtu, and the average implied volatility over the same period was 33 percent. This produced lower and upper bounds for the 95-percent confidence interval for May 2011 contracts of $3.09 per MMBtu and $5.11 per MMBtu, respectively. At this time last year, the natural gas May 2010 futures contract averaged $4.77 per MMBtu and implied volatility averaged 39 percent. The corresponding lower and upper limits of the 95-percent confidence interval were $3.57 per MMBtu and $6.39 per MMBtu. source www.eia.doe.gov... For the latest updates PRESS CTR + D or visit Stock Market news Today
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