Spot crude oil, natural gas prices

Oil doubled since 12/08

Wendy Natt, Sep 03, 09.

A Houston Economic Indicators email update from Skip Kasdorf at the Greater Houston Partnership (GHP) reports on the latest figures, year-to-date trends, year-over-year comparisons, and forecasts for spot crude oil prices:

The Friday closing spot market price for West Texas Intermediate (WTI), the benchmark U.S. crude oil, averaged $71.08/bbl in August, down 39 percent from August ’08, according to data published today by the U.S. Energy Information Administration (EIA). The August average is the highest monthly average since last October, when oil prices were tumbling from the record high above $147 reached in July ’08. On the final Friday of August, the price closed at $72.72, more than double the recent low of $33.17 in mid-December.

In its August Short-Term Energy Outlook, EIA expects WTI to average $59.94 this year, a bit above the $55.90 average posted through August, and $72.42 next year. EIA’s lowest quarterly average next year is $71 in Q1. If that forecast is on target, it’s good news for Houston’s upstream energy firms. Other forecasts anticipate prices averaging less than $70 next year, reflecting uncertainty about the prospects for demand growth in a recovering global economy.

Meanwhile, another GHP update from Kasdorf reports that natural gas prices are still on the downfall, now at their lowest level since February 2002, and with no sign of imminent recovery:

The Friday closing spot market price for Henry Hub natural gas averaged $3.01 per million British thermal units in August, down nearly two-thirds from August ’08, according to data published today by the U.S. Energy Information Administration (EIA). Prices declined throughout August and into early September, yesterday reaching $2.25—the lowest level since $2.18 in February ’02.

The price has now fallen more than 80 percent from its recent peak above $13 in mid-’08. Working gas in underground storage this week is roughly 18 percent above the five-year average for this time of year, and is on track to exceed the record high of 3.565 trillion cubic feet set in October ’07, EIA says.

With supply ample, near-term price improvement seems unlikely. EIA expects spot gas to average $3.35 this quarter and $3.82 in Q4/09. Next year, however, EIA sees gas rising to $5.30 in Q1/10 and remaining above $5 throughout the year as demand strengthens with economic recovery. Should that forecast prove accurate, some projects that aren’t feasible at current prices would be economically viable.

More information on these and other trends and conditions now affecting the economy of the Houston region can be found in the latest (September) volume of GHP’s Economy at a Glance (pdf). These monthly reports provide comparison charts and graphs from original source documents for a wide range of economic indicators.

You can also link to the publication directly from the GHP website. Archived issues are also available online to GHP members.