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Short-Term Energy Outlook

Release Date: February 6, 2018  |  Next Release Date: March 6, 2018  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Petroleum Products

Gasoline prices: The front-month futures price of reformulated blendstock for oxygenate blending (RBOB, the petroleum component of gasoline used in many parts of the country) settled at $1.90 per gallon (gal) on February 1 (Figure 6), an increase of 13 cents/gal since January 2. The RBOB–Brent crack spread (the difference between the price of RBOB and the price of Brent crude oil) rose by 6 cents/gal to settle at 24 cents/gal over the same period. EIA compares RBOB prices to Brent prices because EIA research indicates that U.S. gasoline prices usually move with Brent prices, the international crude oil benchmark.

In January, RBOB prices rose to the highest level since late August because of relatively tight supply conditions for the month of January in conjunction with higher crude oil prices. For the four weeks ending January 26, 2018, the days of supply of U.S. gasoline inventories (when including both U.S. gasoline product supplied and finished motor gasoline exports) fell to 25.2 days, which is below the five-year range for the month of January.

Figure 6: Historical RBOB front-month futures prices and crack spread

Ultra-low sulfur diesel prices: The ultra-low sulfur diesel (ULSD) front-month futures price rose by 3 cents/gal from January 2 to settle at $2.09/gal on February 1. On January 26, the ULSD price reached the highest point since February 2015. The ULSD-Brent crack spread (the difference between the price of ULSD and the price of Brent crude oil) decreased by 4 cents/gal over the same period, settling at 43 cents/gal (Figure 7).

Distillate prices rose as colder-than-normal temperatures affected much of the United States in the first half of January. Temperatures are also expected to be colder than normal at the beginning of February, which may be lending additional support to ULSD prices. In addition to temporary weather-related price support, EIA has revised annual U.S. distillate consumption higher in 2018 and 2019 by 26,000 b/d and 45,000 b/d, respectively, compared with the January 2018 STEO. EIA now expects distillate fuel consumption to increase by 2.7% in 2018, which would be the highest growth rate since 2014. The higher distillate consumption forecast reflects updated U.S. economic growth assumptions in this STEO in response to the U.S. tax reform bill passed in December 2017 and its potential impact on industrial and manufacturing activity.

Figure 7: Historical ULSD front-month futures price and crack spread

Since November 2017, the ULSD front-month futures price premium to the Northwest Europe ULSD spot price has remained, on average, at the highest level since the extreme cold weather in the United States during the winter of 2014–15 (Figure 8). The current premium has been supported by the combination of cold weather and regional distillate market fundamentals. Distillate inventories in the Petroleum Administration for Defense District (PADD) 1B, the New York Harbor delivery point of the ULSD futures contract, declined by 9% in the four weeks ending January 26. In contrast, gasoil inventories in the European trading hub of Amsterdam-Rotterdam-Antwerp have risen sharply for six straight weeks and, as of January 25, are slightly above its five-year average.

PADD 1B distillate inventories for the week ending January 26 were 3% below the five-year average level. However, they were 27% higher than during the same week in 2015. Trade press indicates that the premium between U.S. and European ULSD prices during January reached a level high enough that some European distillate cargoes were booked for export to the U.S. East Coast, which sometimes occurs during this time of year in the event of very cold weather.

Figure 8: ULSD front month - Northwest Europe ULSD spot price differential

U.S. Petroleum and Other Liquids
  2016201720182019
Crude Oil prices (dollars per barrel)
WTI Spot Average 43.3350.7958.2857.51
Brent Spot Average 43.7454.1562.3961.51
Imported Average 38.7048.5354.9553.97
Refiner Average Acquisition Cost 40.6950.2757.2556.51
Retail prices including taxes (dollars per gallon)
Regular Gasoline 2.152.422.622.58
Diesel Fuel 2.312.652.912.87
Heating Oil 2.102.532.882.81
Production (million barrels per day)
Crude Oil 8.869.3310.5911.18
Natural Gas Plant Liquids 3.513.734.204.56
Fuel Ethanol 1.001.031.031.03
Biodiesel 0.1020.1050.1280.139
Consumption (million barrels per day)
Motor Gasoline 9.329.299.339.40
Distillate Fuel Oil 3.883.954.064.09
Jet Fuel 1.611.691.721.72
Total Consumption 19.6919.8820.3320.68
Primary Assumptions (percent change from previous year)
U.S. Real GDP Growth 1.52.22.62.5
Heating Degree Days -5.1-1.511.0-0.6
Distillate-weighted Industrial Production 1.73.12.92.4

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