Release date: December 13, 2017 | Next release date: December 20, 2017
EIA forecasts a mostly balanced oil market in 2018
The U.S. Energy Information Administration's (EIA) December Short-Term Energy Outlook (STEO) expects global liquid fuels demand to increase in 2018, but not keep pace with supply growth, resulting in global liquids inventories increasing modestly in 2018. STEO forecasts increasing global liquid fuels inventories by an average of 50,000 barrels per day (b/d) in 2018, a downward revision from a 290,000 b/d inventory increase forecast in the November STEO (Figure 1). The change in STEO is driven by upward historical revisions to Chinese consumption and downward revisions to forecast production from countries within the Organization of the Petroleum Exporting Countries (OPEC).
On November 30, 2017, OPEC announced an extension of its agreement to reduce crude oil production through the end of 2018, which was broadly in line with both EIA’s November STEO and market expectations in the days leading up to the meeting. The non-OPEC countries that agreed to crude oil production cuts in 2017 also agreed to continue limiting output through the end of 2018. Saudi Arabia and Russia will co-chair a monitoring committee designed to assess the group’s adherence to the production targets. The group plans to reassess target production levels at their June 2018 meeting in the context of market conditions at that time. EIA estimates OPEC crude oil production averaged 32.5 million b/d in 2017, a 0.2 million b/d decrease from 2016 levels, and forecasts OPEC crude oil production to average 32.7 million b/d in 2018.
Although OPEC is expected to restrain production growth, EIA forecasts that higher output from non-OPEC countries will contribute to overall growth in world liquid fuels production in 2018. The non-OPEC outlook for liquid fuels production is 0.1 million b/d higher than EIA’s November STEO, averaging 60.3 million b/d in 2018, 1.7 million b/d higher than the 2017 level. This growth, together with the forecast 0.3 million b/d growth in OPEC crude oil production and another 0.1 million b/d increase in OPEC non-crude liquids production, results in forecast total global liquids production growth of 2.0 million b/d in 2018 (Figure 2). EIA expects that crude oil price increases in late 2017 will support growth in U.S. crude oil production to more than 10.0 million b/d by mid-2018. Overall U.S. crude oil production is forecast to increase by an average of 0.8 million b/d in 2018. Canada, Brazil, Norway, the United Kingdom, and Kazakhstan are also forecast to add a combined 0.7 million b/d of growth in liquids production in 2018.
Despite higher oil prices, EIA expects global liquid fuels demand to increase by more than 1.6 million b/d in 2018, up from growth of almost 1.4 million b/d in 2017. Demand growth is not forecast to keep pace with supply growth, however, resulting in global liquids inventories increasing modestly in 2018. With global inventories expected to increase in 2018, EIA forecasts Brent crude oil prices will decline from current levels of more than $60 per barrel (b) to an average of $57/b in 2018, nearly $2/b higher than previously forecast in the November STEO. EIA forecasts West Texas Intermediate (WTI) crude oil prices to average $53/b in 2018, which is also nearly $2/b higher than forecast in the November STEO.
The forecast for oil prices remains highly uncertain. WTI futures contracts for March 2018 delivery, traded during the five-day period ending December 7, 2017, averaged $57/b. The value of options contracts currently establishes the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices for March at $48/b and $68/b, respectively (Figure 3). The 95% confidence interval for market expectations widens considerably over time, with lower and upper limits of $36/b and $84/b, respectively, for prices in December 2018.
U.S. average regular gasoline and diesel prices fall
The U.S. average regular gasoline retail price fell nearly 2 cents from the previous week to $2.49 per gallon on December 11, up 25 cents from the same time last year. The West Coast and Gulf Coast prices each fell more than three cents to $2.97 per gallon and $2.22 per gallon, respectively, the East Coast price fell nearly three cents to $2.47 per gallon, and the Rocky Mountain price fell two cents to $2.51 per gallon. The Midwest price increased one cent to $2.37 per gallon.
The U.S. average diesel fuel price fell 1 cent to $2.91 per gallon on December 11, 42 cents higher than a year ago. The West Coast and Rocky Mountain prices each fell three cents to $3.34 per gallon and $2.99 per gallon, respectively, the Midwest price fell more than one cent to $2.86 per gallon, and the East Coast and Gulf Coast prices each fell less than one cent, remaining at $2.90 per gallon and $2.71 per gallon, respectively.
Propane inventories rise slightly
U.S. propane stocks increased by 0.2 million barrels last week to 74.7 million barrels as of December 8, 2017, 5.9 million barrels (7.3%) lower than the five-year average inventory level for this same time of year. Gulf Coast and East Coast inventories increased by 0.7 million barrels and 0.1 million barrels, respectively, while Rocky Mountain/West Coast inventories rose modestly, remaining virtually unchanged. Midwest inventories decreased by 0.6 million barrels. Propylene non-fuel-use inventories represented 3.3% of total propane inventories.
Residential heating oil and propane prices increase, wholesale prices decrease
As of December 11, 2017, residential heating oil prices averaged $2.88 per gallon, 1 cent per gallon more than last week and almost 35 cents per gallon higher than last year’s price at this time. The average wholesale heating oil price for this week averaged $2.02 per gallon, almost 2 cents per gallon lower than last week, but nearly 31 cents per gallon higher than a year ago.
Residential propane prices averaged $2.46 per gallon, 1 cent per gallon more than last week and 30 cents per gallon higher than a year ago. Wholesale propane prices averaged $1.10 per gallon, less than 1 cent per gallon lower than last week, but nearly 36 cents per gallon higher than last year's price.
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Retail prices (dollars per gallon)
| Retail prices | Change from last | ||
|---|---|---|---|
| 12/11/17 | Week | Year | |
| Gasoline | 2.485 | -0.015 | 0.249 |
| Diesel | 2.910 | -0.012 | 0.417 |
| Heating Oil | 2.880 | 0.011 | 0.349 |
| Propane | 2.461 | 0.014 | 0.304 |
Futures prices (dollars per gallon*)
| Futures prices | Change from last | ||
|---|---|---|---|
| 12/08/17 | Week | Year | |
| Crude oil | 57.36 | -1.00 | 5.86 |
| Gasoline | 1.717 | -0.025 | 0.210 |
| Heating oil | 1.929 | -0.012 | 0.292 |
| *Note: Crude oil price in dollars per barrel. | |||
Stocks (million barrels)
| Stocks | Change from last | ||
|---|---|---|---|
| 12/08/17 | Week | Year | |
| Crude oil | 443.0 | -5.1 | -40.2 |
| Gasoline | 226.5 | 5.7 | -3.5 |
| Distillate | 128.1 | -1.4 | -27.9 |
| Propane | 74.668 | 0.198 | -20.955 |