U.S. raises oil forecast $3 a barrel
August average now seen at $76.50, agency says, citing heat, Prudhoe Bay; Bodman sees limited impact.
NEW YORK (CNNMoney.com) -- The government Tuesday raised its forecast for the average price of oil in August by $3 a barrel, citing July's heat wave and decreased production from the closure of BP's oilfield in Alaska's North Slope.
The Energy Information Administration (EIA), the numbers arm of the Energy Department, estimated in its monthly energy forecast that oil is expected to average $76.50 a barrel in August, up from its prior forecasts of $73.50.
It said the Prudhoe Bay field in the North Slope would not return to full production until February 2007.
Energy Secretary Sam Bodman also said it could take months for full production to return, but that the loss shouldn't have a huge impact on consumers. He said much of the production will be made up by existing U.S. reserves or more imports from counties such as Saudi Arabia, Mexico, Ecuador and Colombia.
Bodman also said the cost of the pipeline shutdown and repairs should fall on the industry, not consumers.
The news caused an initial bump in oil prices, although crude last traded at $76.75, down 23 cents, on the New York Mercantile Exchange. Prices jumped 3 percent to end near record highs Monday on news of the BP Alaska shutdown.
The energy agency also said things won't get any better for consumers in the short run.
"Significant relief from the high crude oil and gasoline prices is not likely to occur soon," the report said. "The current tight market must also cope with strong gasoline demand, which typically reaches its seasonal peak in August, and the traditionally more active months of the hurricane season."
EIA said the West Coast could be particularly affected by the BP shutdown, as much of its crude oil for refining comes from Alaska. Importing oil to cover the shortfall will raise the cost of gasoline and other refined products, it added.
BP said Monday it was shutting production in its Prudhoe Bay oilfield after sections of its pipelines were found to have corroded by as much as 70 percent. The move takes 400,000 barrels of oil, or about 8 percent of total U.S. domestic production, off the market.
In producing it's short term analysts, EIA said 400,000 barrels of oil from Prudhoe Bay are likely to remain offline in September and October, with the field gradually returning to production over the next few months before finally returning to its original capacity next February.
Bodman said repairs may be possible on the pipeline while half of its production capacity, or 200,000 barrels per day, remained online.
In its report, EIA also said worldwide demand would rise 1.3 million barrels a day in 2006 despite high prices, although that number represents a downward revision of 300,000 barrels from the agency's previous estimate.