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Short-Term Energy Outlook

Release Date: July 7, 2015  |  Next Release Date: August 11, 2015  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Prices

Global Crude Oil Prices

North Sea Brent crude oil spot prices decreased by $3/b in June to a monthly average of $61/b. Oil prices have been relatively stable in recent months despite consistent growth in global petroleum and other liquids inventories, which grew by an estimated 1.9 million b/d in June and an average of almost 3.0 million b/d April and May, compared with an average build of 0.8 million b/d in the second quarter of 2014. Inventory builds are projected to moderate somewhat in the coming months, but are expected to remain high compared with previous years.

The monthly average WTI crude oil spot price increased to an average of $60/b in June, up $1/b from May. After increasing for 20 consecutive weeks to a record 62.2 million barrels on April 17, crude oil inventories at Cushing, Oklahoma, have since decreased by 5.8 million barrels as of June 26. Along with falling Cushing inventories, strong U.S. refinery runs and production outages in Canada have put upward pressure on the price of WTI crude oil.

EIA projects the Brent crude oil price will average $60/b in 2015 and $67/b in 2016, both unchanged from last month's STEO. WTI prices in both 2015 and 2016 are expected to average $5/b less than the Brent crude oil price. However, this price projection remains subject to the uncertainties surrounding the possible lifting of sanctions against Iran and other market events. In addition, there is potential downward price pressure in the second half 2015 once refinery runs moderate following the seasonal peaks in demand from the summer driving season.

The current values of futures and options contracts continue to suggest high uncertainty in the price outlook (Market Prices and Uncertainty Report). WTI futures contracts for October 2015 delivery traded during the five-day period ending July 1 averaged $59/b, while implied volatility averaged 31%. 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 2015 at $45/b and $79/b, respectively. The 95% confidence interval for market expectations widens over time, with lower and upper limits of $41/b and $89/b for prices in December 2015. Last year at this time, WTI for October 2014 delivery averaged $104/b, and implied volatility averaged 14%. The corresponding lower and upper limits of the 95% confidence interval were $92/b and $118/b.

Petroleum Product Prices

Rising crude oil prices, strong demand for U.S. gasoline, and several refinery outages in the Midwest and West Coast contributed to an increase in U.S. regular gasoline retail prices from a monthly average of $2.47/gal in April to $2.80/gal in June. EIA expects monthly average prices to decline through the summer as refineries continue to produce high levels of gasoline and as demand begins to decrease following the peak in the summer driving season. EIA projects regular gasoline retail prices to average $2.63/gal during the third quarter of 2015, 11 cents/gal higher than in last month's STEO, and $2.34/gal in the fourth quarter.

The U.S. regular gasoline retail price, which averaged $3.36/gal in 2014, is projected to average $2.48/gal in 2015, 4 cents/gal higher than in last month's STEO, and $2.55/gal in 2016, which is unchanged from last month's STEO.

The diesel fuel retail price, which averaged $3.83/gal in 2014, is projected to fall to an average of $2.86/gal in 2015, 2 cents/gal lower than in last month's STEO, and then rise to $3.03/gal in 2016.

As with crude oil, the market's expectation of uncertainty in monthly average gasoline prices is reflected in the pricing and implied volatility of futures and options contracts. New York Harbor reformulated blendstock for oxygenate blending (RBOB) futures contracts for October 2015 delivery, traded over the five-day period ending July 1, averaged $1.80/gal. The probability that the RBOB futures price will exceed $2.35/gal (consistent with a U.S. average regular gasoline retail price above $3.00/gal) in October 2015 is about 5%.

Natural Gas Prices

The Henry Hub natural gas spot price averaged $2.78/million British thermal units (MMBtu) in June, a decrease of 7 cents/MMBtu from the May price. EIA expects monthly average spot prices to remain lower than $3/MMBtu in July, and lower than $4/MMBtu through the remainder of the forecast. The projected Henry Hub natural gas price averages $2.97/MMBtu in 2015 and $3.31/MMBtu in 2016.

Natural gas futures contracts for October 2015 delivery traded during the five-day period ending July 1 averaged $2.85/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for October 2015 contracts at $1.92/MMBtu and $4.24/MMBtu, respectively. At this time last year, the natural gas futures contract for October 2014 delivery averaged $4.40/MMBtu, and the corresponding lower and upper limits of the 95% confidence interval were $3.37/MMBtu and $5.76/MMBtu, respectively.

Coal Prices

The annual average coal price to the electric power sector fell from $2.39/MMBtu in 2011 to $2.36/MMBtu in 2014. EIA expects the delivered coal price to average $2.29/MMBtu in 2015 and $2.30/MMBtu in 2016.

Electricity Retail Prices

The U.S. retail price of electricity to the residential sector is projected to average 12.8 cents per kilowatthour in 2015, which is 2.5% higher than the average price last year. This year-over-year increase in average electricity prices, combined with higher expected summer residential use, leads to a forecast 5.9% ($23) increase in the typical residential customer's summer electricity expenditures compared with last summer.

Prices
  2013 2014 2015 2016
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)
97.98 93.17 55.51 62.04
Brent Crude Oil
(dollars per barrel)
108.56 98.89 60.22 67.04
Gasolineb
(dollars per gallon)
3.51 3.36 2.48 2.55
Dieselc
(dollars per gallon)
3.92 3.83 2.86 3.03
Heating Oild
(dollars per gallon)
3.78 3.72 2.84 2.89
Natural Gasd
(dollars per thousand cubic feet)
10.30 10.94 10.27 10.39
Electricityd
(cents per kilowatthour)
12.22 12.50 12.81 13.12
Coale
(dollars per million Btu)
2.34 2.36 2.29 2.30

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