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Short-Term Energy Outlook

Release Date: July 8, 2014  |  Next Release Date: August 12, 2014  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Prices

Global Crude Oil Prices

North Sea Brent crude oil spot prices averaged $112/bbl in June, an increase of $2/bbl from May. This was the 12th consecutive month in which average Brent crude oil spot prices fell within a relatively narrow range of $107/bbl to $112/bbl. The escalating conflict in Iraq, continued record-high levels of Chinese crude oil imports in 2014, and ongoing delays to Libyan oil exports have contributed to upward price pressure. The forecast Brent crude oil price averages $110/bbl in 2014, $2/bbl higher than estimated for 2014 in last month's STEO, and $105/bbl in 2015, which is $3/bbl higher than in last month's STEO.

The WTI crude oil spot price increased from an average of $102/bbl in May to $106/bbl in June. 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 delivery point for WTI, have fallen by more than half since the start of the year, from 42 million barrels on January 24 to below 21 million barrels on June 27, the lowest level since November 2008. The discount of WTI crude oil to Brent crude oil, which averaged more than $13/bbl from November 2013 through January 2014, has since fallen to $6/bbl in June. The U.S. Commerce Department's Bureau of Industry and Security (BIS) recently authorized two companies to export stabilized lease condensate processed in a distillation tower. EIA now expects the discount of WTI to Brent crude oil to average $9/bbl in the second half of 2014, which is $1/bbl lower than last month's STEO. EIA expects the discount to average $10/bbl in 2015.

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 October 2014 delivery, traded during the five-day period ending July 2, averaged $104/bbl. Implied volatility averaged 14%, establishing the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in October 2014 at $92/bbl and $118/bbl, respectively. Last year at this time, WTI for October 2013 delivery averaged $98/bbl and implied volatility averaged 21%. The corresponding lower and upper limits of the 95% confidence interval were $81/bbl and $118/bbl.

Petroleum Product Prices

The U.S. annual average regular gasoline retail price, which averaged $3.51/gal in 2013, is projected to increase to an average of $3.54/gal in 2014 before falling to $3.45/gal in 2015. Diesel fuel prices, which averaged $3.92/gal in 2013, are projected to average $3.93/gal in 2014 and $3.88/gal in 2015, 3 cents and 10 cents higher than projected in last month's STEO, respectively.

EIA expects that the monthly average regular gasoline retail price will fall from $3.69/gal in June to $3.61/gal in September. The September 2014 New York Harbor reformulated blendstock for oxygenate blending (RBOB) futures contract averaged $3.01/gal for the five trading days ending July 2. Based on the market value of futures and options contracts for this key petroleum component of gasoline, there is a 4% probability that its price at expiration will exceed $3.35/gal, consistent with a monthly average regular-grade gasoline retail price exceeding $4.00/gal in September 2014. Daily and weekly national average prices can differ significantly from monthly and seasonal averages, and there are also significant differences across regions, with monthly average prices in some areas exceeding the national average price by 30 cents/gal or more.

Natural Gas Prices

Natural gas spot prices averaged $4.59/MMBtu at the Henry Hub in June. EIA expects spot prices will remain near current levels until the start of the next winter heating season. Projected Henry Hub natural gas prices average $4.77/MMBtu in 2014 and $4.50/MMBtu in 2015.

Natural gas futures prices for October 2014 delivery (for the five-day period ending July 2) averaged $4.40/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for October 2014 contracts at $3.37/MMBtu and $5.76/MMBtu, respectively. At this time last year, the natural gas futures contract for October 2013 averaged $3.62/MMBtu and the corresponding lower and upper limits of the 95% confidence interval were $2.69/MMBtu and $4.88/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. Monthly average coal prices have increased by 10 cents per MMBtu since the beginning of the year, with the April price averaging $2.40/MMBtu. EIA expects average delivered coal prices to increase over the forecast period, with prices of $2.39/MMBtu in 2014 and $2.41/MMBtu in 2015.

Electricity Retail Prices

EIA expects the U.S. residential annual average electricity price to increase by 3.1% this year, which would be the highest growth rate since 2008, primarily in response to higher fuel costs for power generation. The largest price increases occur in the Northeast region. Projected residential prices increase by an additional 2.4% during 2015.

Prices
  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 97.91 100.98 95.17
Brent Crude Oil
(dollars per barrel)
111.65 108.64 109.55 104.92
Gasolineb
(dollars per gallon)
3.63 3.51 3.54 3.45
Dieselc
(dollars per gallon)
3.97 3.92 3.93 3.88
Heating Oild
(dollars per gallon)
3.79 3.78 3.85 3.75
Natural Gasd
(dollars per thousand cubic feet)
10.69 10.31 11.24 11.85
Electricityd
(cents per kilowatthour)
11.88 12.12 12.49 12.79
Coale
(dollars per million Btu)
2.38 2.35 2.39 2.41

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