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Short-Term Energy Outlook

Release Date: September 9, 2014  |  Next Release Date: October 7, 2014  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Prices

Global Crude Oil Prices

North Sea Brent crude oil spot prices averaged $102/bbl in August, a decrease of $5/bbl. Or 4.7%, from July. Brent crude oil prices were driven downward in large part because of weakening global oil demand as well as growing Libyan oil exports. August was the first in 13 consecutive months in which average Brent crude oil spot prices fell outside the relatively narrow range of $107/bbl to $112/bbl. The forecast Brent crude oil price averages $106/bbl in 2014, $2/bbl lower than in last month's STEO, and $103/bbl in 2015, $2/bbl lower than in last month's STEO.

The monthly average WTI crude oil spot price fell from a high of $106/bbl in June to $97/bbl in August. Driven in part by new pipelines delivering crude oil to refining centers along the Gulf Coast, crude oil inventory levels at the Cushing, Oklahoma, storage hub, the futures market's delivery point for WTI, fell below 18 million barrels on July 25, the lowest level since October 2008. Crude oil inventories then built for four consecutive weeks to reach 20.7 million barrels on August 22. After falling to an annual low of $3/bbl in July, the discount of WTI crude oil to Brent crude oil increased to $5/bbl in August. While record high refinery runs contributed to the WTI discount falling to $3/bbl in July, the discount widened in August while refinery runs remained elevated. EIA now expects WTI crude oil prices to average $93/bbl in the fourth quarter of 2014, $5/bbl lower than in last month's STEO, and $95/bbl in 2015. The discount of WTI to Brent crude oil is forecast to widen from current levels, averaging $10/bbl in the fourth quarter of 2014 and $8/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 December 2014 delivery, traded during the five-day period ending September 4, averaged $93/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 December 2014 at $81/bbl and $107/bbl, respectively. Last year at this time, WTI for December 2013 delivery averaged $106/bbl and implied volatility averaged 25%. The corresponding lower and upper limits of the 95% confidence interval were $86/bbl and $131/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 $3.41/gal in September, before falling to $3.18/gal in December. The U.S. annual average regular gasoline retail price, which averaged $3.51/gal in 2013, is projected to average $3.46/gal in 2014 and $3.41/gal in 2015, 4 cents and 6 cents lower than in last month's STEO, respectively. Diesel fuel prices, which averaged $3.92/gal in 2013, are projected to fall to an average of $3.86/gal in 2014 and $3.82/gal in 2015, 2 cents and 5 cents lower than projected in last month's STEO, respectively. 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 falling above or below the national average price by 30 cents/gal or more.

Natural Gas Prices

Natural gas prices fell from $4.05/MMBtu in July to $3.91/MMBtu in August as storage injections continue to outpace 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 $3.87/MMBtu in 2015.

Natural gas futures prices for December 2014 delivery (for the five-day period ending September 4) averaged $4.07/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for December 2014 contracts at $3.09/MMBtu and $5.35/MMBtu, respectively. At this time last year, the natural gas futures contract for December 2013 averaged $3.87/MMBtu and the corresponding lower and upper limits of the 95% confidence interval were $2.98/MMBtu and $5.04/MMBtu.

Coal Prices

Annual average coal prices to the electric power industry fell over the past few years, from $2.39/MMBtu in 2011 to $2.35/MMBtu in 2013. EIA expects the average delivered coal prices to be $2.36/MMBtu in 2014 and remain at that level in 2015.

Electricity Retail Prices

Residential electricity prices have risen in most states so far this year, compared with the same period in 2013. EIA expects the U.S. residential price to average 12.5 cents per kilowatthour in 2014, which is 3.1% higher than the average last year. The increase in average prices will be highest in the New England states, at 7.8%. Average U.S. residential electricity prices grow at a slower rate of 1.7% in 2015.

Figure 24: U.S. Residential Electricity Price

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 98.28 94.67
Brent Crude Oil
(dollars per barrel)
111.65 108.64 106.00 103.00
Gasolineb
(dollars per gallon)
3.63 3.51 3.46 3.41
Dieselc
(dollars per gallon)
3.97 3.92 3.86 3.82
Heating Oild
(dollars per gallon)
3.79 3.78 3.81 3.69
Natural Gasd
(dollars per thousand cubic feet)
10.69 10.31 11.09 11.18
Electricityd
(cents per kilowatthour)
11.88 12.12 12.49 12.70
Coale
(dollars per million Btu)
2.38 2.35 2.36 2.36

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