Oil and Natural Gas prediction July 2011

Oil and Natural Gas prediction July 2011, crude oil prices prediction july 2011, natural gas forecas july 2011 : The improving economic scene – both here in the U.S. as well as worldwide – and the continued unrest in producing countries had been the main driver of the oil rally, which saw the commodity zoom past the $110 per barrel level earlier this year.

However, apprehensions about high U.S. crude stocks, the release of emergency oil supplies from government-held strategic reserves into the world market, and uncertainty over oil supply disruptions in the Middle East have been weighing on investor sentiment, weakening oil prices to less than $100 a barrel.

But far too many factors weigh on oil prices to definitively size up each one of them for their respective impact on prices. Some of those factors include OPEC decisions, geostrategic tensions the value of the U.S. dollar and seasonal variables, etc.

As per the latest release by the Energy Information Administration (EIA), crude supplies are higher than the year-earlier level and are above the upper limit of the average for this time of the year. This has led to domestic demand concerns against a backdrop of persistently slow job growth. At the same time, global oil consumption is expected to grow at a healthy rate this year, buoyed by the continued strength in the major emerging market economies.

As such, crude oil’s near-term fundamentals remain patchy to say the least. The long-term outlook for oil, however, remains favorable, given the commodity’s constrained supply picture.

According to the EIA, world crude consumption grew by an estimated 2.2 million barrels per day in 2010 to 86.6 million barrels per day, which more than made up for the losses of the previous 2 years and surpassed the 2007 level of 86.3 million barrels per day (reached prior to the economic downturn). One might note that global demand for 2009 was below the 2008 level, which itself was below the 2007 level – the first time since the early 1980s of two back-to-back negative growth years.

The agency added that average global consumption growth over the next 2 years is likely to return to rates seen before the onset of the global downturn in 2008. The EIA, in its Short-Term Energy Outlook, said that it expects the current economic recovery to contribute towards global oil demand growth of 1.4 million barrels per day in 2011 and 1.6 million barrels per day in 2012. However, the EIA’s most recent demand growth forecast for 2011 is 270,000 barrels per day, lower than in the earlier version, as the agency sees world economic growth lagging expectations.

Recently, the Organization of Petroleum Exporting Countries (OPEC) – the oil cartel that supplies around 40% of the world’s crude – also trimmed its 2011 world oil demand outlook, citing the unsteady global economy that has added risks to the forecast. OPEC predicts that global oil demand will increase by 1.36 million barrels per day annually, reaching 88.18 million barrels a day in 2011 from last year’s 86.82 million barrels a day. The organization’s current estimate for 2011 is lower by a marginal 20,000 barrels a day from its last report, issued in June 2011. In 2012, OPEC expects global oil demand to grow at a slightly lower 1.32 million barrels per day.

However, the third major energy consultative body, the Paris-based International Energy Agency (IEA), forecasted marginally stronger-than-previously-anticipated global oil demand in 2011. In its latest ‘Oil Market Report’, the IEA, an energy-monitoring body of 28 industrialized countries, said it expects world oil demand to grow by 1.2 million barrels per day in 2011, reflecting an upward revision of 200,000 barrels a day over the previous assessment, mainly driven by the non-OECD (Organization for Economic Cooperation and Development) economies. The agency – in its first 2012 forecast in a monthly report – added that global oil demand next year is expected to rise by 1.5 million barrels per day year-over-year to a hefty 91.0 million barrels per day.

We expect crude oil to trade in the $100-$110 per barrel range in the near future, supported by the continued tightening of world oil markets. But this does not mean that we will not see any short-term pullbacks. On the whole, we expect oil prices in 2011 to be higher than 2010 levels, but remain significantly below 2008 peak levels.

Natural Gas Outlook july 2011

A supply glut pressured natural gas futures for much of 2010, as production from dense rock formations (shale) remain robust, thereby overwhelming demand.

As per the U.S. Energy Department, domestic gas output increased significantly in 2010 by an estimated 2.4 billion cubic feet per day, or 4.1%, as production declines in Alaska and the Gulf of Mexico were offset by a healthy increase in lower-48 onshore volumes. Storage amounts hit a record high of 3.840 trillion cubic feet in November, while gas prices during the year fell 21%.

However, stocks of the commodity slid approximately 2.261 trillion cubic feet (Tcf) during the five-month period (November 5, 2010 to April 1, 2011) on the back of a colder-than-normal end to this past winter, production freeze-offs in January/February and the steadily declining rig count. These factors cut into the U.S. supply overhang, thereby creating a deficit in natural gas inventories after erasing the hefty surplus over last year’s inventory level and the five-year average level.

But with the end of the winter’s peak in heating demand, natural gas prices continue to be under pressure against the backdrop of sustained strong production. Producers are now hoping that the gap between supply and demand will further narrow in the coming months as they bet on a hotter-than-expected summer and an active hurricane season.

Looking forward, the EIA expects average total production to rise by 5.8% in 2011 and by 0.9% in 2012, while total natural gas consumption is anticipated to grow by 2.0% this year and decline slightly (by 0.2%) during the next year.

We believe these supply/demand dynamics – the projected lower production growth and almost flat consumption – will lead to the strengthening of natural gas prices in 2012.

But until then the weak fundamentals are going to continue to weigh on natural gas prices, translating into limited upside for natural gas-weighted companies and related support plays. (source www.stockbloghub.com )