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Short-Term Energy Outlook

Release Date: July 11, 2017  |  Next Release Date: August 8, 2017  |  Full Report    |   Text Only   |   All Tables   |   All Figures


Crude Oil Prices

The monthly average spot price of Brent crude oil decreased by $4 per barrel (b) in June to $46/b, marking the first month of 2017 in which Brent crude oil spot prices averaged below $50/b. The return of 0.1 million b/d of combined crude oil production in Libya and Nigeria contributed to lower oil prices in June, as did builds in total U.S. crude oil and petroleum products inventories that were above the five-year average during the weeks ending June 2 and June 9. Also, Brent crude oil spot prices declined by nearly 5% in late May following the news of the OPEC agreement that extended production cuts through the first quarter of 2018, as some market participants had anticipated more aggressive cuts.

EIA forecasts the annual average Brent crude oil spot price to be $51/b in 2017 and $52/b in 2018. Global oil inventories are forecast to be relatively unchanged in the second half of 2017 before returning to average inventory builds of 0.2 million b/d in 2018. Given this expectation of relative balance in the global oil market through the forecast period, Brent crude oil spot prices are expected to remain fairly flat in the coming months.

EIA forecasts the Brent price to average $50/b during the second half of 2017 and first half of 2018. Daily and monthly average prices could vary significantly from this target, because global economic developments and geopolitical events in the coming months have the potential to push oil prices higher or lower than the current STEO price forecast.Uncertainty remains regarding the duration of, and adherence to, the current OPEC production cuts, which could influence prices in either direction. Also, the U.S. tight oil sector continues to be dynamic, and quickly evolving trends in this sector could affect both current prices and expectations for future prices. However, lasting upward and downward price movements could be limited over the next year because U.S. tight oil producers have locked in higher production levels at the higher oil prices seen in early 2017.

Some upward price pressures could emerge in the second half of 2018 if global oil inventories decline during that period and if the market expects global oil inventory withdrawals heading into 2019. EIA forecasts Brent crude oil prices to average $53/b during the second half of 2018, with prices rising to $55/b by the end of 2018.

Average West Texas Intermediate (WTI) crude oil prices are forecast to be $2/b lower than Brent prices in 2017 and in 2018. The slight price discount of WTI to Brent in the forecast is based on the assumption that rising U.S. crude oil production will result in WTI-priced U.S. crude oil exports competing with international volumes priced off of Brent in global crude oil markets.

The current values of futures and options contracts suggest uncertainty in the oil price outlook. WTI futures contracts for October 2017 delivery that were traded during the five-day period ending July 6 averaged $46/b, and implied volatility averaged 29%. These levels established the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in October 2017 at $36/b and $60/b, respectively. The 95% confidence interval for market expectations widens slightly over time, with lower and upper limits of $32/b and $67/b for prices in December 2017. In July 2016, WTI for October 2016 delivery averaged $49/b, and implied volatility averaged 37%, with the corresponding lower and upper limits of the 95% confidence interval at $35/b and $67/b.

Product Prices

EIA expects the retail price of regular gasoline to average $2.38 per gallon (gal) during the 2017 summer driving season (April through September), 8 cents/gal lower than projected in last month's STEO, primarily as a result of lower crude oil prices. EIA expects that the U.S. monthly average retail price of regular gasoline decreased from an unseasonably early summer peak of $2.42/gal in April 2017 to $2.35/gal in June. Following an increase to an average of $2.38/gal in the third quarter, EIA expects retail gasoline prices to fall to $2.13/gal in December. The U.S. regular gasoline retail price, which averaged $2.15/gal in 2016, is forecast to average $2.32/gal in 2017 and $2.33 /gal in 2018.

Among the regions, annual average forecast prices for 2017 range from a low of $2.08/gal in the Gulf Coast–Petroleum Administration for Defense District (PADD) 3–to a high of $2.75/gal in the West Coast (PADD 5).

The diesel fuel retail price averaged $2.31/gal in 2016, which was the lowest annual average since 2004. The diesel price is forecast to average $2.59/gal in 2017 and $2.71/gal in 2018, driven higher primarily by higher crude oil prices and growing diesel consumption. Rising diesel consumption is expected to contribute to gradually increasing diesel refinery margins. Diesel refinery margins based on Brent crude oil are expected to average 39 cents/gal in 2017 and 43 cents/gal in 2018, compared with an average of 34 cents/gal in 2016.

Natural Gas Prices

Henry Hub spot prices have been relatively flat in 2017, averaging $3.04 per million British thermal units (MMBtu) during the first half of the year, which is the same as the fourth quarter of 2016 average price. Prices averaged $2.98/MMBtu in June. Closer-to-normal winter temperatures are expected this winter following last year's warm winter, which contributes to growth in residential and commercial consumption. Also, export growth is forecast to increase in the second half of 2017 and in 2018. Both factors could contribute to modest upward price pressure. Forecast Henry Hub natural gas spot prices average $3.10/MMBtu in 2017 and $3.40/MMBtu in 2018.

Natural gas futures contracts for October 2017 delivery that were traded during the five-day period ending July 6 averaged $2.98/MMBtu. Current options and futures prices indicate that market participants place the lower and upper bounds for the 95% confidence interval for October 2017 contracts at $2.17/MMBtu and $4.08/MMBtu, respectively. Last year at this time, the natural gas futures contracts for October 2016 delivery averaged $2.88/MMBtu, and the corresponding lower and upper limits of the 95% confidence interval were $2.00/MMBtu and $4.14/MMBtu, respectively.

Coal Prices

EIA estimates the delivered coal price averaged $2.11 per million British thermal units (MMBtu) in 2016, which is 5% lower than the 2015 price. Coal prices are forecast to increase in 2017 and in 2018 to $2.15/MMBtu and $2.21/MMBtu, respectively.

Electricity Retail Prices

EIA forecasts that the U.S. retail electricity price paid by residential customers will average 13.2 cents per kWh this summer, up 3.7% from last summer, reflecting the increase in cost of fuels for generating electricity, particularly natural gas. This increase in prices mostly offsets the expected decline in summer electricity consumption, so that the average residential customer's electricity bill this summer is forecast to be 1.3% lower than last year.

  2015 2016 2017 2018
a West Texas Intermediate.
b Average regular pump price.
c On-highway retail.
d U.S. Residential average.
e Electric power generation fuel cost.
WTI Crude Oila
(dollars per barrel)
48.67 43.33 48.95 49.58
Brent Crude Oil
(dollars per barrel)
52.32 43.74 50.79 51.58
(dollars testper gallon)
2.43 2.15 2.32 2.33
(dollars per gallon)
2.71 2.31 2.59 2.71
Heating Oild
(dollars per gallon)
2.65 2.10 2.48 2.60
Natural Gasd
(dollars per thousand cubic feet)
10.36 10.06 10.94 11.07
(cents per kilowatthour)
12.65 12.55 12.98 13.41
(dollars per million Btu)
2.23 2.11 2.15 2.21

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Related Tables
Table SF01. U.S. Motor Gasoline Summer Outlook PDF
Table SF02. Average Summer Residential Electricity Usage, Prices and Expenditures PDF
Table 1. U.S. Energy Markets Summary PDF
Table 2. Energy Prices PDF
Table 4c. U.S. Regional Motor Gasoline Prices and Inventories PDF
Table 5b. U.S. Regional Natural Gas Prices PDF
Table 7c. U.S. Regional Retail Electricity Prices PDF
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