Crude oil and natural gas prices continue to gain strength on news of increased demand.
Oil futures on NYMEX for February delivery closed Wednesday at $63.57 per barrel its highest mark since Dec. 9, 2014. Natural gas for distribution at Henry Hub in Louisiana closed at $2.906 Wednesday.
The Energy Information Administration (EIA) reported that oil inventories declined again last week making it the eighth consecutive week it has reported a drop in inventories.
EIA also reported U.S. crude production declined by 290,000 barrels to 9.492 million barrels per day (bpd) last week.
EIA raised its 2018 price forecasts for West Texas Intermediate crude oil to $55.33 and Brent crude to $59.74 in its monthly forecast issued Tuesday.
Traders study inventory levels at the major storage facilities at Cushing, Ok., and levels have dropped below 50 million barrels, which was last witnessed in February 2015. This is another indication of tightening oil supplies.
The spike in the daily natural gas price index along the East Coast has settled once warmer weather arrived. Several days last week prices jumped to as much as $30, but on Wednesday the price at the New York Citygate was $3.30. By comparison, the price at Houston Ship Channel was $3.09.
In other news, the U.S. became a net exporter of natural gas in 2017 for the first time since 1957, according to an analyst with EIA, Victoria Zaretskaya. Net exports averaged about 0.4 billion cubic feet (Bcf) per day last year, flipping from net inflows of 1.8 Bcf per day in 2016.
A significant projected increase in natural gas sent by pipeline to Mexico and a growing number of LNG shipments to the rest of the world should guarantee the trend moving forward, Zaretskaya said. There is only one LNG export facility operating in the U.S. currently, Cheniere Energy’s Sabine Pass terminal in Louisiana. With the completion of construction on two more LNG export facilities in the U.S. in 2018, LNG global markets will face considerable changes in the future.
Alex Mills is the former President of the Texas Alliance of Energy Producers. The opinions expressed are solely of the author.