The US Energy Information Administration predicted that the Organization of Petroleum Exporting Countries will maintain quotas to ensure world oil prices remain above $22/bbl over the next 18 months.
"Moderate OPEC restraint, combined with accelerating world demand growth later in 2002 and into 2003 is expected to maintain elevated prices," EIA said in its latest monthly outlook on energy supply and demand.
World oil price markers fell in June, with both North Sea Brent crude oil and the OPEC basket prices averaging $1-1.50/bbl below May averages. Nevertheless, June marked the fourth consecutive month that the OPEC basket price averaged above $22/bbl, the lower end of OPEC's target range, EIA said.
"The basket price has been above $22/bbl since Mar. 8 and is projected to remain within the target range ($22-28/bbl) through 2003," EIA said.
The US benchmark West Texas Intermediate price averaged almost $2/bbl lower in June than in May, but WTI prices were rising at month's end and during the first week of July averaged more than $1/bbl higher than the June average of $25.50/bbl.
"Our base case projection for WTI in 2002 is almost $26/bbl, rising to just above $29 in 2003," EIA said.
Summer gasoline update
The US average pump price for gasoline continued to waffle within a very narrow range in June, posting an estimated average of $1.42/gal for the month, within a penny or two of the averages reported since late March, EIA said.
On a weekly basis US average gasoline prices did not vary by more than 3¢/gal between the first week in April and the last week in June.
"This level of calm for the second quarter period is reminiscent of the relative tranquility exhibited for the period 1997 to 1999," EIA said. However, the agency noted that average prices were much lower during that time than then they are now. More horizontal drift seems likely for the very near term, but beyond that, gradual upward movements in pump prices in concert with the upward drift in crude oil prices is expected.
Natural gas
EIA said spot wellhead natural gas prices have generally stayed over $3/Mcf since mid-March.
The market has been fairly volatile over the last several months, with spot gas prices bouncing up or down by as much as 25¢/Mcf on a daily basis. Weather forecasts and underground storage reports are two factors that have had an exaggerated effect on the spot price of gas, EIA said.
"Working gas in underground storage has remained at unusually high levels for the past several months. Since the lack of underlying demand strength and excess gas in storage have failed to keep prices below $3/Mcf for 3 months now, we project prices to remain in the $2.90-3.20/Mcf range for the remainder of the summer," EIA said.
But if relatively cool weather prevails in the third quarter, sharply lower prices are expected later this summer.
