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Energy Prices Set to Continue Upward Swing



A recent lull in the increase of oil, gasoline and natural gas is no sign that prices are set to decline in the future, according to the Department of Energy's Energy Information Administration.


A recent lull in the increase of oil, gasoline and natural gas is no sign that prices are set to decline in the future, according to the Department of Energy's Energy Information Administration.

Despite a recent decline to $60.85 a barrel, the EIA's recently released Short-term Energy Outlook predicts that the price of a barrel of West Texas Intermediate will average between $64 and $65 for 2007.

Global oil demand is expected to rise by 1.5 million barrels per day in 2007, an increase of 0.7 million barrels per day above the 2006 growth. Most of the increased growth reflects demand recovery in the United States, according to EIA. China accounts for about one-third of the projected growth in world oil demand.

Despite the fairly stable outlook, the market will continue to face short-term volatility, according to EIA.  Prices could increase if weather or security-related disruptions threaten production abroad, or if delays in non-OPEC supply growth continue. On the other hand, prices could decrease if oil demand slows or if Saudi Arabia decides to abandon production cuts.

Demand for natural gas is also expected to grow in the near term. Natural gas consumption is expected to grow 2.4 percent from 2006 to 2007, compared with a 1.3-percent decline from 2005 to 2006, EIA says.

Current forecasts for colder winter and cooler summer months in 2007 compared with 2006 drives increases in natural gas demand for heating, while it will lower natural gas demand for electricity generation needed for summer cooling.  

Industrial sector natural gas consumption is estimated to have declined by 1.5 percent in 2006 and is projected to be followed by increases of 1.1 and 1.8 percent in 2007 and 2008, respectively, according to EIA.  

Above-average summer temperatures (cooling degree-days were 21 percent above normal in July) stimulated a 7.4-percent increase in natural gas consumption by the power sector in 2006.  A return to more normal weather is expected to leave power sector demand growth relatively unchanged in 2007.




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  posted on 1/10/2007   Article Use Policy




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