The unseasonably warm temperatures in the United States and throughout most of the northern hemisphere through early January reduced the demand for heating fuels, leading to an easing of petroleum and natural gas prices. Between mid-December 2006 and January 18, 2007, the spot price of West Texas Intermediate (WTI) crude oil fell by about $12 per barrel to a low of $50.51 per barrel. The Henry Hub natural gas spot price fell from $8.67 per thousand cubic feet (mcf) on December 1 to a low of $5.56 per mcf on January 2. The turn to colder weather in the second half of January contributed to increasing crude oil and natural gas prices. In February 2007 the WTI crude oil price is expected to average $56.00 per barrel, and the Henry Hub natural gas price is projected to average $7.35 per mcf.
We have lowered our price projection for WTI crude oil from our last Outlook. WTI crude oil, which averaged $66.00 per barrel in 2006, is projected to average about $59.50 per barrel in 2007 and $62.50 per barrel in 2008 (West Texas Intermediate Crude Oil Price). The Henry Hub natural gas price, which averaged $6.90 per mcf in 2006, is projected to average $7.10 mcf in 2007 and $7.60 in 2008.
Total U.S. petroleum product consumption is projected to increase in 2007 and 2008 by 1.4 percent and 1.5 percent, respectively. Lower projected prices in 2007, combined with projections for moderate economic growth and the assumption of normal weather, are the primary reasons for increased growth in consumption.
Projections of U.S. heating fuel expendituresfor the 2006-07 winter season have declined over the last two Outlooks, reflecting relatively warm winter weather from November through the middle of January. Average household heating fuel expenditures are projected to be $862 this winter compared to $948 last winter.
