EIA forecasts price growth

14 January 2010

Written by Neil Brunskill

The US Energy Information Administration (EIA) believes that prices of crude oil and derivatives will rise over the course of this year, and that the market will tighten on the whole.

Releasing its Short-Term Energy Outlook report earlier this week, the organisation stated that it believed West Texas Intermediate (WTI) prices will average around $80 per barrel in 2010 - a price close to the commodity's current level.

Over the course of 2009, WTI crude prices achieved an average price of $62 per barrel.

But, as the global economy recovers from the current downturn and countries achieve market growth, price rises can be expected.

The EIA believes that in the US, gross domestic product will grow by two per cent over the coming year, while oil consumption weighted real GCP will grow by 2.5 per cent.

A rise in crude prices will inevitably affect derivatives prices, the organisation argued, noting that regular grade gasoline prices will likely rise.

Demand for liquid oil fuels is likely to increase this year, the organisation believes, noting that last year demand fell for the second year in a row - the first time since 1983 that this has happened. As the world began to recover from a state of economic decline in the middle of last year, this fall in demand began to peter out.

Indeed, the organisation believes demand will grow by 1.1 million barrels per day over the course of the year - mainly as a result of increased consumption by non-OECD countries.

While demand for the commodity decreased over 2009, stock levels remained historically high, the Energy Information Administration said.

Recent weeks have seen demand for oil and heating oil rise as a result of the colder weather that has gripped much of the northern hemisphere. However, as forecasts of warmer weather begin to appear, the prices have begun to ease back.

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