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Short-Term Energy Outlook

Release Date: July 11, 2017  |  Next Release Date: August 8, 2017  |  Full Report    |   Text Only   |   All Tables   |   All Figures

U.S. Liquid Fuels

Consumption

Total U.S. petroleum and other liquid fuels consumption is forecast to average 19.9 million barrels per day (b/d) in 2017, which would be an increase of 310,000 b/d (1.6%) compared with the 2016 level. Consumption is then forecast to grow by 360,000 b/d (1.8%) in 2018. The growth in both years is expected to be led by higher consumption of hydrocarbon gas liquids (HGL) and distillate fuel.

EIA forecasts HGL consumption growth to be the strongest among the liquid fuels. HGL consumption is expected to increase by 120,000 b/d (4.9%) in 2017 and by 250,000 b/d (9.6%) in 2018. This growth reflects an increase in ethylene-producing petrochemical plants that use ethane as their feedstock. Two new plants came online in the first half of 2017, and five more are expected to begin operating by the end of 2018.

After a decline in 2016, distillate consumption averaged 3.9 million b/d during the first half of 2017, an increase of 80,000 b/d from the same period a year earlier. The growth stemmed from an increase in on-road fuel use, oil and gas drilling activity fuel use, and industrial fuel use that was partially offset by a decrease in distillate use for home heating. Overall, distillate fuel consumption growth is forecast to accelerate in the second half of 2017, contributing to expected annual average growth of 90,000 b/d (2.2%) in 2017 followed by growth of 100,000 b/d (2.6%) in 2018.

Motor gasoline consumption is forecast to increase by 10,000 b/d (0.2%) in 2017, resulting in average consumption of slightly more than 9.3 million b/d for the year. In 2016, gasoline consumption increased by 1.6%. The slower forecast growth in gasoline consumption reflects slower expected growth in non-farm employment and disposable income and an expected increase in the retail price of gasoline. Gasoline consumption in 2018 is forecast to grow by 50,000 b/d (0.5%) from 2017 levels.

Jet fuel consumption increased by 100,000 b/d in the first quarter of 2017 compared with the same quarter in 2016, averaging 1.6 million b/d. However, year-over-year growth in jet fuel consumption is expected to slow heading into the summer travel season, resulting in overall growth of 40,000 b/d (2.4%) for 2017 followed by a decrease of 20,000 b/d (1.3%) in 2018. The expected slowing and subsequent decrease in jet fuel consumption is partially because of increases in the price of airline tickets and improvements in fuel efficiency.

Supply

EIA forecasts total U.S. crude oil production to average 9.3 million b/d in 2017, up 0.5 million b/d from 2016. In 2018, crude oil production is forecast to rise to an average of 9.9 million b/d. If achieved, forecast 2018 production would be the highest on record, surpassing the previous record of 9.6 million b/d set in 1970. The 2018 forecast is 0.1 million b/d lower than in last month's STEO because of lower forecast crude oil prices in late 2017 and in 2018.

U.S. crude oil production is forecast to reach 10.1 million b/d in December 2018, which would be 0.9 million b/d higher than the June 2017 level and a 1.4 million b/d increase since the end of 2016. Increased production from tight rock formations within the Permian and Eagle Ford regions in Texas and the Bakken region in North Dakota accounts for 1.1 million b/d of the expected 1.4 million b/d of crude oil production growth from the end of 2016 through the end of 2018. Most of the remaining 0.3 million b/d increase is expected to come from the Federal Gulf of Mexico, as seven new projects are expected to come online by the end of 2018.

The Permian region is expected to produce 2.9 million b/d of crude oil by the end of 2018, which is roughly a 0.5 million b/d increase from estimated June 2017 levels, and would represent about 30% of total U.S. crude oil production in 2018. The Permian region is the geographic area that predominately spans the Permian Basin of western Texas and southeastern New Mexico and covers 53 million acres. Within the Permian Basin are smaller sub-basins, including the Midland Basin and the Delaware Basin, all of which contain historically prolific non-tight formations as well as multiple prolific tight formations such as the Wolfcamp, Spraberry, and Bonespring. With the large geographic area of the Permian region and stacked plays, operators can continue to drill through several tight oil layers and increase production even with sustained WTI prices below $50/b.

The Eagle Ford region is expected to produce an average of 1.3 million b/d in both 2017 and 2018, up from 1.2 million b/d in late 2016. Crude oil production in this region had been generally declining since early 2015, dropping from an average of 1.7 million b/d to less than 1.2 million b/d by November 2016. Similar to the Permian, Eagle Ford wells have high initial production rates and fast decline rates, requiring the continuous drilling of new wells to maintain production levels. Crude oil production growth in the Eagle Ford region is expected to be fairly limited for most of the next year because WTI crude oil prices are forecast to average below $50/b until the second half of 2018.

The Bakken region is expected to produce an average of 1.1 million b/d in 2017 and 2018, slightly lower than the 1.2 million b/d produced in 2015. The Bakken region predominately spans the Williston Basin that contains the Bakken and Three Forks formations. Although the Bakken region is geographically large (23 million acres), it contains fewer identified prolific formations than the Permian region. Operators in this region also are affected by winter weather and have much greater transportation constraints in moving oil to refineries and markets. Some of these transportation constraints are expected to be resolved by the recent completion of the Dakota Access Pipeline. Bakken production has been generally decreasing since early 2015, but recent drilling activity suggests that this has already begun to turn around. With the WTI price expected to remain below $50/b until the second half of 2018, crude oil production from the Bakken region is forecast to remain relatively stable near 1.1 million b/d through 2018.

Gulf of Mexico production is forecast to average 1.7 million b/d in 2017, an increase of 0.1 million b/d from 2016, and then increase to 1.9 million b/d in 2018. The anticipated expansion of the Tahiti field and the start of production from the Horn Mountain Deep field in 2017 and the Big Foot and Stampede projects in 2018, along with other projects that will begin operations in 2017 and 2018, are expected to contribute to increases in production from the Gulf of Mexico.

Crude oil production in Alaska is expected to be unchanged in both 2017 and 2018 at almost 0.5 million b/d.

EIA projects HGL production at natural gas processing plants will increase by 0.3 million b/d in 2017 and by 0.4 million b/d in 2018. EIA expects higher ethane recovery rates in 2017 and 2018, following planned increases in demand for petrochemical plant feedstock in the United States and abroad. Recently opened terminals, a growing ship fleet, and pipeline expansions allow more U.S. ethane, propane, and butanes to reach international markets, with HGL net exports expected to increase by nearly 0.3 million b/d in 2017 and by 0.1 million b/d in 2018.

Product Prices

EIA expects the retail price of regular gasoline to average $2.38 per gallon (gal) during the 2017 summer driving season (April through September), 8 cents/gal lower than projected in last month's STEO, primarily as a result of lower crude oil prices. EIA expects that the U.S. monthly average retail price of regular gasoline decreased from an unseasonably early summer peak of $2.42/gal in April 2017 to $2.35/gal in June. Following an increase to an average of $2.38/gal in the third quarter, EIA expects retail gasoline prices to fall to $2.13/gal in December. The U.S. regular gasoline retail price, which averaged $2.15/gal in 2016, is forecast to average $2.32/gal in 2017 and $2.33 /gal in 2018.

Among the regions, annual average forecast prices for 2017 range from a low of $2.08/gal in the Gulf Coast–Petroleum Administration for Defense District (PADD) 3–to a high of $2.75/gal in the West Coast (PADD 5).

The diesel fuel retail price averaged $2.31/gal in 2016, which was the lowest annual average since 2004. The diesel price is forecast to average $2.59/gal in 2017 and $2.71/gal in 2018, driven higher primarily by higher crude oil prices and growing diesel consumption. Rising diesel consumption is expected to contribute to gradually increasing diesel refinery margins. Diesel refinery margins based on Brent crude oil are expected to average 39 cents/gal in 2017 and 43 cents/gal in 2018, compared with an average of 34 cents/gal in 2016.

U.S. Petroleum and Other Liquids
  2015 2016 2017 2018
Crude Oil prices (dollars per barrel)
WTI Spot Average 48.67 43.33 48.95 49.58
Brent Spot Average 52.32 43.74 50.79 51.58
Imported Average 46.34 38.69 45.44 46.04
Refiner Average Acquisition Cost 48.40 40.69 47.71 48.59
Retail prices including taxes (dollars per gallon)
Regular Gasoline 2.43 2.15 2.32 2.33
Diesel Fuel 2.71 2.31 2.59 2.71
Heating Oil 2.65 2.10 2.48 2.60
Production (million barrels per day)
Crude Oil 9.42 8.87 9.33 9.90
Natural Gas Plant Liquids 3.34 3.48 3.79 4.21
Fuel Ethanol 0.97 1.00 1.02 1.01
Biodiesel 0.082 0.101 0.105 0.109
Consumption (million barrels per day)
Motor Gasoline 9.18 9.33 9.34 9.39
Distillate Fuel Oil 4.00 3.88 3.96 4.07
Jet Fuel 1.55 1.61 1.65 1.62
Total Consumption 19.53 19.63 19.94 20.30
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 -5.1 0.4 8.5
Distillate-weighted Industrial Production -0.2 1.7 3.8 2.5

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