Energy prices fell again Apr. 15, wiping out the small rally from the previous session on the New York Mercantile Exchange.
The May contract for benchmark US light, sweet crudes plunged to a low of $50/bbl Apr. 15 on NYMEX but found strong support at that level and rebounded to $50.49/bbl, down 64¢ for the day. Still, that was down by 11.8% from a high of $57.27 just 2 weeks earlier.
Contributing to the continued fall in energy prices during the week ended Apr. 15 was the latest report from the Paris-based International Energy Agency, which for the first time in more than 2 years lowered its outlook for growth in world demand for crude.
IEA reduced its monthly estimate of global oil demand by a miniscule 50,000 b/d to an average 84.27 million b/d for 2005, claiming oil demand growth in China is declining.
Nonetheless, said Robert S. Morris, Banc of America Securities, New York, “The markets seem to interpret this as perhaps a new trend after the IEA last month raised its global crude oil demand outlook for the 13th time in 17 months.”
Morris said, “In addition, a stronger dollar, given expectations that the Federal Reserve will accelerate interest rate hikes this year, added to the downward momentum for oil prices.”
Meanwhile, the US Energy Information Administration reported Apr. 13 that commercial US stocks of crude rose by 3.6 million bbl to 320.7 million bbl during the week ended Apr. 8. Rather than falling for the sixth consecutive week as analysts previously projected, US gasoline inventories increased by 800,000 bbl to 213.1 million bbl during the same period. Stocks of distillate fuel inched up by 100,000 bbl to 104 million bbl, said EIA officials.
“At the end of the week, officials from Saudi Arabia commented that it would prefer oil prices [on the West Texas Intermediate spot market] in a $40/bbl range, i.e. $40-50/bbl, as opposed to the current $50/bbl range,” said Morris.
LNG imports growing
US imports of liquefied natural gas (LNG) jumped by 29% in 2004 and added 3% to US natural gas supplies, according to an Apr. 14 report by the Department of Energy’s Office of Fossil Energy.
That helped to keep natural gas prices stable for home heating and other uses, said government officials. That increase to 652 bcf, from 507 bcf in 2003, capped a rise of 300% in LNG imports since 1999. Government officials project that LNG imports will account for 20% of US supply by 2020. Currently, 70% of US LNG imports come from Trinidad and Tobago.
In 2002, LNG imports by the US totaled 229 bcf, or 6% of imported natural gas. In 2003, US imports of LNG totaled 506 bcf, or 13% of all imported gas-more than doubling 2002’s total. Data for 2004 show LNG accounted for 15% of total US imports of natural gas. LNG numbers are expected to increase yet again in 2005 and in the years beyond, officials said.
“Natural gas serves most of the nation’s households and many industries in which it is not easily replaced. Both have been hard-hit by higher prices since 2000,” the report noted. Natural gas is used in about 6 of every 10 US households-some 63 million-mostly for heat. It also is an indispensable feedstock for fertilizer and chemical manufacturers and a growing source of fuel for electric-power generation. Increased LNG imports can moderate the price of natural gas supplies to both household and industrial users.
EIA, in its Annual Energy Outlook 2005, projected that the US will need much more LNG over the next 20 years to satisfy increases in demand that cannot be accommodated by domestic or other North American production of gas. It projects that LNG should account for almost 10% of total US supplies of natural gas by 2010, which means imports of 2.5 tcf, and more than 20% of US supply by 2025, with imports of 6.4 tcf.
“High-volume production and global trade in LNG constitute an emerging energy resource for the US and the world in a time of rising demand. Present use is limited by a lack of liquefaction capacity among producing nations and a lack of import terminals among consuming nations,” government officials said. “At least 40 proposed [LNG] terminals have been announced for the US in recent years, but not all will be built. A lesser number have actually applied for the necessary state and federal permits,” they said.
(Online Apr. 18, 2005; author’s e-mail: [email protected])
