Sep 2016 Financial News

EIA's forecast and Budget 2017. Agency predicts: - oil price at US$52 - USA, exporter of nat gas

Sep 15, 2016

The United States Energy Information Agency (EIA) is predicting that crude prices will average US$52 a barrel in 2017. The US agency— responsible for collecting, analysing, and disseminating energy information—also revealed that while it expected slightly higher prices for natural gas at the Henry Hub, it also sees the US becoming a net exporter of LNG and, therefore, providing further competition for T&T and Atlantic LNG.

The EIA is one of the agencies that Finance Minister Colm Imbert told the Parliament last year that he relied on in determining the prices of oil and gas for 2016 budget. The EIA’s forecast comes weeks before Imbert is due to deliver his 2017 budget proposals to the Parliament.

In its most recent short-term energy outlook released last week, the EIA said:

“Although the pace of inventory builds is slowing, continuing builds and high inventory levels will likely contribute to Brent prices maintaining the recent US$40 a barrel to US$50/b trading range during the next two quarters. “EIA forecasts Brent prices to average US$45/b during the fourth quarter of 2016 and first quarter of 2017, acknowledging that global economic developments and geopolitical events in the coming months have the potential to push oil prices near the top or bottom of the US$40/b to US$50/b range.”

Last week Energy Minister Nicole Olivierre told the Business Guardian that the oil price for the fiscal year “averaged just under US$42 a barrel” above the US$35 a barrel that was announced by the Finance Minister in his revised budget on April 8, 2016.

In revising the oil and gas price downwards, Minister Imbert had told Parliament that to be safe, fiscal operations during the second half of the fiscal year would have been based on an oil price of US$35 per barrel and a gas price of US$2 per mmbtu.

He explained: “This would imply another sizable shortfall in energy tax receipts, compared with the budget projections.”

Imbert told Parliament that government’s revenue shortfall was primarily in tax receipts from the energy companies, reflecting a sharp decline in projected income from oil and gas companies in the first six months of this fiscal year of over $2 billion. And this was even after the revenue projections from petroleum were cut drastically in preparing the budget.

Imbert told the House in April: “This House will recall that the 2016 budget was based on an oil price of US$45 per barrel for WTI crude, a level that was considered fairly conservative even by international experts, since at the time the WTI price was averaging US$46 per barrel, with a projection that it would average US$53 per barrel in 2016. The gas price assumed in the Budget was US$2.75 per mmbtu, Henry Hub, at a time when the market price was US$2.66 per mmbtu.

“As it turned out, due to the hardline position taken by OPEC, where Saudi Arabia and other OPEC countries, in their ongoing battle for market share with shale oil and gas producers in the USA, chose not to cut production in the face of a global oversupply of oil.

“Accordingly, notwithstanding the predictions of international energy experts, such as the highly respected EIA, the average oil price for the first six months of fiscal 2016 was US$37 per barrel while the average gas price was US$2 per mmbtu.

“By way of comparison, in the previous fiscal year 2014/2015, the corresponding oil and gas prices were US$61 per barrel for WTI and US$3.35 per mmbtu for Henry Hub, respectively.”

The report:

The EIA noted that the monthly average spot price of Brent crude oil increased by US$1 a barrel in August to US$46/b. The EIA noted this occurred mainly due to market reactions to a potential OPEC deal to freeze production at current levels put upward pressure on prices in August.

It forecast: “Global oil inventory draws to begin in mid-2017. The expectation of inventory draws contributes to rising prices in the second quarter of 2017, with price increases continuing later in 2017. Brent prices are forecast to average US$52/b in 2017. Forecast Brent prices average US$58/b in the fourth quarter of 2017, reflecting the potential for more significant inventory draws beyond the forecast period.

“Average West Texas Intermediate (WTI) crude oil prices are forecast to be US$1/b lower than Brent prices in 2016 and 2017. The slight price discount of WTI to Brent in the forecast is based on the assumption of competition between the two crudes in the US Gulf Coast refinery market.”

T&T was once responsible for 70 per cent of all the gas imported into the US, however, this changed dramatically with the advent of shale gas. This not only led to the collapse of natural gas prices at the Henry Hub but, according to the EIA, is now about to turn the tables and make the US a net exporter of natural gas.

Its September outlook read:

“EIA projects that LNG gross exports will rise to an average of 0.5 Bcf/d in 2016, with the startup of Cheniere’s Sabine Pass LNG liquefaction plant in Louisiana, which sent out its first cargo in February 2016. Sabine’s second train is currently in the commissioning process. EIA projects that gross LNG exports will average 1.5 Bcf/d in 2017, as Sabine Pass ramps up capacity.

“With expected growth in gross exports, net imports of natural gas decline from 2.6 Bcf/d in 2015 to 0.2 Bcf/d in 2017. The United States is expected to become a net exporter of natural gas beginning in the second quarter of 2017.

 

Source:
ENERGY REPORTER
Business Guardian, BG8
Thursday September 15, 2016