‹ Analysis & Projections

Short-Term Energy Outlook

Release Date: August 12, 2014  |  Next Release Date: September 9, 2014  |  Full Report    |   Text Only   |   All Tables   |   All Figures


Global Crude Oil Prices

North Sea Brent crude oil spot prices averaged $107/bbl in July, a decrease of $5/bbl from June. July was the 13th consecutive month in which average Brent crude oil spot prices fell within a relatively narrow range of $107/bbl to $112/bbl. The forecast Brent crude oil price averages $108/bbl in 2014, $1/bbl lower than in last month's STEO, and $105/bbl in 2015, which is unchanged from last month's STEO.

The WTI crude oil spot price increased from an average of $102/bbl in May to $106/bbl in June, before falling to $104/bbl in July. Driven in part by the relocation of crude oil to refining centers along the Gulf Coast through new pipelines, crude oil inventory levels at the Cushing, Oklahoma, storage hub, the futures market's delivery point for WTI, have fallen by more than half since early this year, from nearly 42 million barrels on January 24 to below 18 million barrels on July 25, the lowest level since October 2008. The discount of WTI crude oil to Brent crude oil averaged more than $13/bbl from November 2013 through January 2014. Record high refinery runs contributed to the WTI discount falling to $3/bbl in July, which was the same level seen during July 2013 when refinery runs were similarly at their seasonal peak for the year. EIA now expects the discount of WTI to Brent crude oil to average $7/bbl in the second half of 2014 and $9/bbl in 2015, reductions of $2/bbl and $1/bbl, respectively, from last month's STEO.

Energy price forecasts are highly uncertain, and the current values of futures and options contracts suggest that prices could differ significantly from the forecast levels (Market Prices and Uncertainty Report). WTI futures contracts for November 2014 delivery, traded during the five-day period ending August 7, averaged $96/bbl. Implied volatility averaged 16%, establishing the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in November 2014 at $84/bbl and $111/bbl, respectively. Last year at this time, WTI for November 2013 delivery averaged $103/bbl and implied volatility averaged 21%. The corresponding lower and upper limits of the 95% confidence interval were $85/bbl and $125/bbl.

Petroleum Product Prices

EIA expects that the monthly average regular gasoline retail price will fall from the recent peak of $3.69/gal in June to $3.50/gal in September, before falling to $3.30/gal in December. The U.S. annual average regular gasoline retail price, which averaged $3.51/gal in 2013, is projected to average $3.50/gal and $3.46/gal in 2014 and 2015, respectively. Diesel fuel prices, which averaged $3.92/gal in 2013, are projected to fall to an average of $3.89/gal in 2014, 4 cents lower than projected in last month's STEO, and $3.87/gal in 2015.

Natural Gas Prices

Natural gas spot prices fell from $4.47/million British thermal units (MMBtu) at the beginning of July to $3.78/MMBtu at the end of the month as natural gas stock builds continued to outpace the historical norms. EIA expects spot prices will remain below $4/MMBtu through October, before rising with winter heating demand. Projected Henry Hub natural gas prices average $4.46/MMBtu in 2014 and $4.00/MMBtu in 2015.

Natural gas futures prices for November 2014 delivery (for the five-day period ending August 7) averaged $3.96/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for November 2014 contracts at $3.03/MMBtu and $5.16/MMBtu, respectively. At this time last year, the natural gas futures contract for November 2013 averaged $3.58/MMBtu and the corresponding lower and upper limits of the 95% confidence interval were $2.68/MMBtu and $4.79/MMBtu.

Coal Prices

Annual average coal prices to the electric power industry fell over the past two years, from $2.39/MMBtu in 2011 to $2.35/MMBtu in 2013. EIA expects average delivered coal prices to increase over the forecast period, with prices of $2.38/MMBtu in 2014 and $2.39/MMBtu in 2015.

Electricity Retail Prices

EIA expects the U.S. residential electricity price to average 12.5 cents per kilowatthour during 2014, an increase of 2.8% from last year. Electricity prices increase in all regions of the country except for the Pacific states, where prices in 2014 are expected to average 2.7% lower than last year. Residential customers in New England experience the highest average price increase (8.5%).

  2012 2013 2014 2015
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)
94.12 97.91 100.45 96.08
Brent Crude Oil
(dollars per barrel)
111.65 108.64 108.11 105.00
(dollars per gallon)
3.63 3.51 3.50 3.46
(dollars per gallon)
3.97 3.92 3.89 3.87
Heating Oild
(dollars per gallon)
3.79 3.78 3.83 3.74
Natural Gasd
(dollars per thousand cubic feet)
10.69 10.31 11.06 11.35
(cents per kilowatthour)
11.88 12.12 12.46 12.69
(dollars per million Btu)
2.38 2.35 2.38 2.39

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