New York, Sept. 7 (Bloomberg) -- Crude oil prices will rise
to about $23 a barrel through March, prolonging this year's
rally, as production cuts end a world supply glut, the U.S.
Department of Energy said.
Crude oil traded in New York will average $22.78 to $23.28 a
barrel through March, the department said, up $1.50 to $2 from
its August forecast. Prices have surged 88 percent this year and
today reached a 23-month high of $22.61 a barrel.
``Prices have turned out to be a lot higher than we
thought,' said Dave Costello, the economist in charge of the
short-term energy outlook for the DOE's Energy Information
Administration. ``We just had to boost our forecasts or we would
have been way wrong. Prices have been strong and they could rise
some more.'
The rally is fueled by output cuts by the Organization of
Petroleum Exporting Countries and other producers, which have
pledged to reduce production by about 7 percent.
After the DOE's report, crude oil for October delivery rose
61 cents, or 2.8 percent, to $22.61 on the New York Mercantile
Exchange. It was the highest closing price since Oct. 3, 1997,
the day the U.S. sent an aircraft carrier to the Persian Gulf
and warned Iran not to send jet fighters into Iraq.
Gasoline to Rise in September
The DOE now expects that the national average for regular
gasoline to rise to $1.26 a gallon in September, the highest
monthly average of the year. Prices are likely to drop by 2 cents
to $1.24 next month and a penny further in November to $1.23
a gallon as less driving reduces gasoline demand in the autumn.
If crude oil prices rise as forecast, gasoline prices next
year could be 11 cents to 12 cents higher a gallon than this
summer, Costello said. That would be the highest price since the
Energy Department began weekly price surveys six years ago.
Heating oil also is forecast to be much more expensive than
last season, when prices reached their lowest in about a decade.
The DOE is predicting heating oil prices 24 cents higher a
gallon than last year, averaging $1.06 a gallon. If the U.S.
winter is normal, as expected, heating bills for homes that use
oil could be about $700 a year -- up 40 percent from last year,
when the winter was mild.
``The double whammy is coming, with additional demand coming
amid much higher prices,' Costello said.
Natural gas prices this winter are projected to be about 42
percent higher than last year, when the weather was generally
unseasonably mild, the report said. However, on average, natural
gas prices are expected to increase about 9 percent annually this
year and next.
Natural gas should be a cheaper alternative to competing
fuels derived from crude oil for the rest of this year and all of
2000, the report said. Natural gas prices, based on New York
futures, are 43.5 percent higher than a year ago.
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