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Short-Term Energy Outlook

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

Prices

Global Crude Oil Prices

North Sea Brent crude oil spot prices averaged $87/bbl in October, a decrease of $10/bbl from September and the first month Brent crude oil prices have averaged below $90/bbl since November 2010. The combination of robust world crude oil supply and weak global demand contributed to rising global inventories and lower crude oil prices. The forecast Brent crude oil price averages $83/bbl in 2015, $18/bbl lower than projected in last month's STEO.

The monthly average WTI crude oil spot price fell from an average of $93/bbl in September to $84/bbl in October. High refinery runs contributed to the discount of WTI crude oil to Brent crude oil narrowing from an average of $8/bbl during the first half of this year to an average of $3/bbl in July. More recently, lower-than-expected demand in Europe and Asia combined with continued growth in global liquids supply depressed global crude oil benchmarks like Brent, contributed to the WTI discount to Brent again falling to $3/bbl in October. EIA now expects WTI crude oil prices to average $80/bbl in the fourth quarter of 2014 and $78/bbl in 2015, $11/bbl and $17/bbl lower than projected in last month's STEO, respectively. The discount of WTI to Brent crude oil is forecast to widen slightly from current levels, averaging $6/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 February 2015 delivery, traded during the five-day period ending November 6, averaged $79/bbl. Implied volatility averaged 28%, establishing the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in February 2015 at $63/bbl and $99/bbl, respectively. Last year at this time, WTI for February 2014 delivery averaged $95/bbl and implied volatility averaged 20%. The corresponding lower and upper limits of the 95% confidence interval were $80/bbl and $112/bbl.

Petroleum Product Prices

Monthly U.S. average regular gasoline retail prices fell from $3.69/gal in June to $3.17/gal in October. EIA expects that U.S. regular gasoline retail prices will continue to fall to an average of $2.80/gal in December 2014. The U.S. annual average regular gasoline retail price, which averaged $3.51/gal in 2013, is projected to average $3.39/gal in 2014 and $2.94/gal in 2015, $0.06/gal and $0.44/gal 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 $3.82/gal in 2014 and $3.38/gal in 2015, $0.04 and $0.41 lower than in last month's STEO, respectively.

The February 2015 New York Harbor reformulated blendstock for oxygenate blending (RBOB) futures contract averaged $2.12/gal for the five trading days ending November 6, 2014. Based on the market value of futures and options contracts for this key petroleum component of gasoline, there is a 15% probability that the RBOB futures contract price at expiration will fall below $1.85/gal, consistent with a monthly average regular-grade gasoline retail price less than $2.50/gal in February 2015. There is also a 19% probability that the RBOB futures contract price at expiration may exceed $2.35/gal, consistent with a retail price of $3.00/gal or higher. 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 $0.30/gal or more.

Lower projected crude oil prices also contribute to a reduction in the forecast residential heating oil price and average household heating oil expenditures this winter. The average household that uses heating oil as its primary space heating fuel is expected to pay an average of $3.27/gal this winter, $0.36/gal lower than projected in last month's STEO. The average household is now expected to spend $1,779 for heating oil this winter, $213 lower than in last month's STEO.

Figure 2: U.S. Gasoline and Crude Oil Prices

Natural Gas Prices

The Henry Hub natural gas spot price averaged $3.78/MMBtu in October, a decline of 14 cents from September. EIA expects spot prices to remain relatively low but to rise slightly with winter heating demand. Projected Henry Hub natural gas prices average $4.44/MMBtu in 2014 and $3.83/MMBtu in 2015.

Natural gas futures prices for February 2015 delivery (for the five-day period ending November 6) averaged $4.19/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for February 2015 contracts at $2.76/MMBtu and $6.38/MMBtu, respectively. At this time last year, the natural gas futures contract for February 2014 averaged $3.57/MMBtu and the corresponding lower and upper limits of the 95% confidence interval were $2.70/MMBtu and $4.73/MMBtu.

Coal Prices

The annual average coal price to the electric power industry fell from a historically high $2.39/MMBtu in 2011 to $2.35/MMBtu in 2013. EIA expects the average delivered coal price to be $2.36/MMBtu in 2014 and remain at that level in 2015.

Electricity Retail Prices

EIA expects the U.S. residential price to average 12.5 cents per kilowatthour in 2014, which is 3.0% higher than the average last year. Prices increase in all regions of the country except along the Pacific Coast. Average U.S. residential electricity prices grow at a slower rate of 1.7% in 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 95.00 77.75
Brent Crude Oil
(dollars per barrel)
111.65 108.64 101.04 83.42
Gasolineb
(dollars per gallon)
3.63 3.51 3.39 2.94
Dieselc
(dollars per gallon)
3.97 3.92 3.82 3.38
Heating Oild
(dollars per gallon)
3.79 3.78 3.72 3.25
Natural Gasd
(dollars per thousand cubic feet)
10.65 10.30 11.05 11.06
Electricityd
(cents per kilowatthour)
11.88 12.12 12.48 12.70
Coale
(dollars per million Btu)
2.38 2.35 2.36 2.36

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