By OGJ editors
HOUSTON, Sept. 7 -- Oil and gas production and distribution from the hurricane-ravaged US Gulf Coast will return to nearly normal operation by December, predicts the US Energy Information Administration.
Oil and gas prices, EIA says in its Short-Term Energy Outlook released Sept. 7, might remain elevated by effects of Hurricane Katrina for as long as 3 months.
But EIA offers a warning: "The hurricane season is not yet over, and the severity and location of hurricanes over the next few months could continue to influence US and world oil markets."
Because of uncertainty over the pace of reconstruction, EIA bracketed its supply forecasts within three scenarios: "fast recovery," which "assumes a very favorable set of circumstances" in returning supplies to normal; "slow recovery," which assumes that "significant outages in oil and natural gas production and delivery from the gulf area continue at least into November;" and "medium recovery," a course between the other scenarios.
"In all cases, return to normal operations, in terms of oil and natural gas production and distribution, is achieved or nearly achieved by December," EIA says. "By the end of September all but about 0.9 million b/d of crude oil refining capacity is expected to be back at full rates under the medium recovery case."
Assuming that waivers of fuel quality standards and release of oil from strategic storage ease concerns about adequacy of supply, EIA projects that with fast recovery the average monthly price of West Texas Intermediate crude shows "no incremental impact due to Hurricane Katrina."
Under the slower-recovery cases, "some incremental crude oil price pressure is assumed to remain for up to 3 months."
With slow recovery, the WTI price in EIA's forecast averages $72.05/bbl in September, $70.48/bbl in October, $69.58/bbl in November, and $67.20/bbl in December. The projected December price is 70¢/bbl more than the fast-recovery price projected for that month.
US crude oil production under slow recovery averages 4.3 million b/d in September and recovers to 5.375 million b/d by December in the EIA projection. Average monthly gas production under that scenario rises from 43.65 bcfd to 52.7 bcfd during the same period.
US refinery throughput with slow recovery rises from 15.182 million b/d in September to 15.609 million b/d in October, 16.314 million b/d in November, and 16.577 million b/d in December. Under fast recovery, throughput averages 15.735 million b/d in September and rises to 15.986 million b/d in October, 16.345 million b/d in November, and 16.657 million b/d in December.
The Henry Hub spot price of natural gas peaks at $14.29/Mcf in September under EIA's slow-recovery case and eases back to $12.06/Mcf in November before rising to $12.46/Mcf in December. With fast recovery, the price declines from $12.78/Mcf in September to $11/Mcf by November and turns up to $11.58/Mcf in December.