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Energy Prices Weaker in 2009

May 14, 2009
By: Sara Schafer, Farm Journal Media Business and Crops Editor

Linda Smith, Top Producer Executive Editor
Energy prices rose in early May following reports suggesting that the U.S. economy may have reached a turning point in the current recession, at least in some sectors, reports the Energy Information Administration (EIA). However, EIA expects generally weak prices, given that prospects for a global economic turnaround remain highly uncertain. EIA expects U.S. and global economies to begin to stabilize, and show signs of recovery late in 2009 and into 2010.
Data for the first quarter show high oil inventories, weak consumption, and higher-than-expected production. Price increases will likely be muted by the substantial surplus production capacity held by members of the Organization of the Petroleum Exporting Countries (OPEC), along with very large inventories among members of the Organization for Economic Cooperation and Development (OECD). "The expectation that prices should rise in 2009-2010 because of future economic growth will need to be tempered with the current market reality of this supply overhang,” EIA notes

The price of West Texas Intermediate (WTI) crude oil is expected to remain relatively flat for the remainder of 2009, averaging about $55/barrel in the second half of 2009. Assuming a modest economic improvement next year, WTI prices are expected to average about $58 in 2010.

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Natural Gas. The Henry Hub natural gas spot price is projected to average $4.06/thousand cubic feet (Mcf) in 2009, down from an average of $9.13/Mcf in 2008, reports EIA. Then, buoyed by modest economic growth next year, prices are expected to increase to an average of about $5.21/Mcf in 2010.

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You can e-mail Linda Smith at lsmith@farmjournal.com.

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