This week, gasoline, crude oil, and natural gas prices all rose. It is a trend that has been recurrent almost weekly since June 2020, when there were fewer products and lower prices.
The U.S. had 540 million barrels of oil at the end of summer, excluding oil from the Strategic Petroleum Reserve. This was a new record. Oil prices were between $10 and $15, while retail gasoline was about $2 per gallon.
The Energy Information Administration (EIA), reported Wednesday that oil inventories dropped to 410 million barrels. This is a 24% decline since June 2020, when oil prices rose up to $89 and the average cost of a gallon in the U.S. was $3.538.
EIA stated that commercial inventories fell to the lowest levels since mid 2014 and raised its forecast for Brent crude oil by 11%, to an average of $90 a barrel in February.
EIA reported that natural gas spot prices averaged $4.38 for every million British thermal units (MMBtu), at the U.S. benchmark Henry Hub in February, an 16% increase over December prices. The Northeast and Midwest saw a rise in natural gas demand due to the colder weather.
Global demand for natural gases remains strong. EIA projects that U.S. Liquefied Natural Gas (LNG), exports in 2022 will rise 16% compared to 2021 levels.
EIA predicts that natural gas prices will rise by $4.70/MMBtu in February and then increase to $3.80/MMBtu over the remaining three quarters.
In January, the average price of regular-grade gasoline was $3.31/gallon. This is almost a dollar more than one year ago due to higher oil prices. EIA predicts that gasoline prices will average $3.24/gallon in 2022, and drop below $3.00/gall in the last quarter.
AAA reported that the average gasoline price in the U.S. was $3.538 on Wednesday, an increase of 4.6% from Jan. 3. Texas’ average gasoline price was $3.149.
EIA Acting Administrator Steve Nalley stated that market concerns over oil production disruptions and supply chain vulnerabilities and uncertainties about how central banks might react to combat inflation contribute to a highly unpredictable environment in which oil and petroleum product prices are.
Some forecasters predict $100 oil by the third-quarter.
Already, industry activity is increasing and the Texas Petro Index reports a 28.8% increase in activity.
World Oil magazine reported that exploration and production companies will increase their capital expenditures by 40% this year compared to 2021 in search of new oil and natural gases reserves.
The pandemic caused a drop in demand and petroleum production dropped from a record high 13 million barrels per daily to a record low of 13 million. U.S. oil output dropped to 11,000,000 barrels per day, but it has recovered to an estimate 11.9million b/d.
EIA predicts that the U.S. will produce oil at an all-time high of 12.6 million barrels per day in 2023. The supply will catch up to the demand, and prices will start to fall.
Alex MillsThe former President of Texas Alliance of Energy Producers.