Natural gas prices, which have sagged for some time, will continue their anemic performance into next year, according to the Energy Information Administration (EIA), which expects bloated storage and a relatively mild winter to negate hopes for an early uptick.
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On Tuesday, Brent oil prices fell to a low of $39.81, their lowest since the first quarter of 2009 in the wake of the financial crisis, spurred partly by the pessimism that followed last Friday’s Opec meeting, when no coherent policy was offered and members said they would pursue individual output maximisation strategies.
Starting with the January 2016 STEO, EIA will include Indonesia’s output in the OPEC total for both history and the forecast.
The agency’s price forecasts have declined steadily throughout 2015.
EIA said industrial gas consumption was flat in 2015 but is expected to increase by 3.9 percent in 2016, as new industrial projects, particularly in the fertilizer and chemicals sectors, come online.
Still, the EIA forecast that Brent will average $56 a barrel next year, slightly higher than the average so far this year of $54.61.
Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for March 2016 contracts at $1.51/MMBtu and $3.45/MMBtu, respectively. China’s liquid fuels consumption growth is forecast to average 300,000 b/d in 2015 and in 2016, below the 400,000 b/d growth in 2014.
The EIA lowered its 2016 USA crude production estimate to 8.76 million barrels a day from 8.77 million. Total Lower 48 storage stood at 3,956 Bcf, well above last year’s 3,413 Bcf and more than the five-year average of 3,709 Bcf.
US crude dropped 43 cents to $37.08 a barrel in midday trading Wednesday on the New York Mercantile Exchange. Global oil inventory builds in the third quarter averaged 1.8 million b/d, down from 2 million b/d in the second quarter, which had the largest inventory builds since fourth-quarter 2008. Natural gas spot prices, which are expected to remain below $3/MMBtu through August 2016, support high consumption of natural gas for electricity generation next year, EIA said. “Main crude oil inventory decline is in PADD 3, primarily driven by a significant decline in crude oil imports”.
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In 2016, EIA forecast gas production would increase by 1.5 bcfd due to rising drilling efficiency despite low gas prices and declining rig activity.
