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Short-Term Energy Outlook

Release Date: February 7, 2017  |  Next Release Date: March 7, 2017  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Petroleum Products

Gasoline prices: The front-month futures price of reformulated blendstock for oxygenate blending (RBOB, the petroleum component of gasoline used in many parts of the country) declined 9 cents per gallon (gal) from January 3 to settle at $1.53/gal on February 2 (Figure 5). The RBOB-Brent crack spread (the difference between the price of RBOB and the price of Brent crude oil) declined by 11 cents/gal over the same period.

The RBOB-Brent crack spread declined from December to January for the first time since 2011, as lower domestic gasoline consumption and rising gasoline inventory levels contributed to lower RBOB prices. U.S. gasoline consumption typically falls to its seasonal low in January. However, EIA estimates the decline in gasoline consumption this year between December and January was 57% larger than the average decline over the past five years, falling by almost 0.6 million b/d. Total U.S. gasoline stocks rose to 257 million barrels for the week ending January 27, the second highest for any week based on data going back to 1990.

Figure 5: Brent crude oil vs U.S. and Chinese equity indices

Gulf Coast gasoline crack spreads: Because of lower domestic gasoline consumption, gasoline crack spreads in the futures market and in the New York Harbor spot market (the delivery hub of the RBOB futures contract), are below levels seen last year at this time. In contrast, gasoline crack spreads on the U.S. Gulf Coast are higher than last year because strong international demand is countering weak domestic demand. Most of the gasoline exported from the United States is exported from the U.S. Gulf Coast. Since the second half of 2016, U.S. gasoline exports have increased significantly, reaching more than 1 million b/d during some weeks in December and January. Despite recent lower domestic gasoline consumption, increased overseas demand has pushed gasoline crack spreads on the U.S. Gulf Coast to a record high for the month of January. The Gulf Coast conventional gasoline–LLS crack spread averaged 30 cents/gal in January (Figure 6), 6 cents/gal higher than last January when domestic gasoline consumption was comparatively stronger.

Figure 6: Crude oil implied volatility

Ultra-low sulfur diesel prices: The front-month futures price for the New York Harbor ultra-low sulfur diesel (ULSD) contract declined 2 cents/gal from January 3 to settle at $1.65/gal on February 2. The ULSD-Brent crack spread also declined over the same period (Figure 7).

With warmer-than-normal January temperatures in much of the United States, distillate consumption declined because of lower demand for home heating. EIA estimates distillate consumption averaged 3.8 million b/d in January, the third lowest level for that month in the past 15 years. Both total U.S. distillate stocks and distillate stocks in the U.S. Northeast, the region that uses the most distillate for home heating, set new five-year highs in January.

Figure 7: Probability of the December 2013 WTI contract expiring 
above price levels

U.S. Petroleum and Other Liquids
  2015 2016 2017 2018
Crude Oil prices (dollars per barrel)
WTI Spot Average 48.67 43.33 53.46 56.18
Brent Spot Average 52.32 43.74 54.54 57.18
Imported Average 46.34 38.82 49.95 52.68
Refiner Average Acquisition Cost 48.40 40.93 52.46 55.20
Retail prices including taxes (dollars per gallon)
Regular Gasoline 2.43 2.15 2.39 2.44
Diesel Fuel 2.71 2.31 2.72 2.85
Heating Oil 2.65 2.10 2.61 2.75
Production (million barrels per day)
Crude Oil 9.42 8.88 8.98 9.53
Natural Gas Plant Liquids 3.34 3.49 3.75 4.18
Fuel Ethanol 0.97 1.00 1.01 1.01
Biodiesel 0.082 0.100 0.104 0.111
Consumption (million barrels per day)
Motor Gasoline 9.18 9.29 9.29 9.36
Distillate Fuel Oil 4.00 3.85 3.93 4.04
Jet Fuel 1.55 1.60 1.62 1.61
Total Consumption 19.53 19.58 19.84 20.17
Primary Assumptions (percent change from previous year)
U.S. Real GDP Growth 2.6 1.6 2.3 2.6
Heating Degree Days -10.2 -5.2 3.3 2.6
Distillate-weighted Industrial Production 1.0 0.7 1.4 2.6

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