Release date: March 13, 2019 | Next release date: March 20, 2019
EIA forecasts relatively flat crude oil prices despite lower global production growth
In the March 2019 update of its Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) revised its crude oil price forecast to be slightly higher for 2019 because of tighter forecast balances and higher than expected prices during February. EIA forecasts that the Brent crude oil price will average $63 per barrel (b) in 2019 and $62/b in 2020, compared with $71/b in 2018 (Figure 1). EIA expects that West Texas Intermediate (WTI) crude oil prices will average $9/b lower than Brent prices in the first half of 2019 before the discount gradually narrows to $4/b in the fourth quarter of 2019 and throughout 2020. EIA revised down global petroleum and other liquids production growth from the February STEO, largely because of downward revisions to the U.S. and the Organization of the Petroleum Exporting Countries (OPEC) supply forecasts. The production forecast was revised down more than the consumption forecast, and as a result, global stock builds are expected to be lower, indicating a relatively tighter market compared with the February STEO.
Despite expectations of a tighter market compared with last month’s forecast, EIA still expects rising global liquid fuels inventories and OPEC spare capacity to limit upward price pressure. Brent crude oil spot prices averaged $64/b in February 2019, up $5/b from January 2019 and only about $1/b lower than at the same time last year. The price increases likely reflect falling global liquid fuels inventories, which EIA estimates fell by 1.4 million barrels per day (b/d) in February. EIA revised its 2019 forecast Brent crude oil price up by nearly $2/b to $63/b. The 2020 forecast Brent crude oil price remained unchanged at $62/b.
The Brent–WTI Cushing spot price spread averaged $8.97/b in February, the second-widest spread for any month in the past five years. Although EIA expects the spread to narrow from current levels by the end of the year, EIA is revising its forecast for the Brent–WTI spread to remain at $9/b through May 2019, compared with $8/b in the February STEO. Heading into the spring maintenance season, Cushing stocks increased 4.2 million barrels from the first week in February 2019 through March 8, 2019, likely putting downward pressure on WTI prices. In addition, Midwest gross refinery inputs fell to an average of 3.5 million b/d for the four weeks ending March 1, which is lower than the five-year (2014–18) average level for that time of year.
The U.S. production forecast is lower in both 2019 and 2020 compared with the February forecast, despite an expected increase in pipeline capacity to move crude oil out of the Permian region. The U.S. active oil rig count reached a 10-month low of 834 rigs as of March 8, suggesting the rate of U.S. crude oil production growth could slow further. Although lower than the February forecast, EIA still forecasts U.S. crude oil production to increase by 1.3 million b/d in 2019 and 0.7 million b/d in 2020.
EIA forecasts OPEC crude oil and liquid fuels production will average 35.9 million b/d in 2019 and 35.6 million b/d in 2020, down by 150,000 b/d and 60,000 b/d, respectively, compared with the February STEO forecast. Saudi Arabia cut crude oil production by more than expected in February and averaged 10 million b/d, the lowest level since April 2017. This production cut contributed to EIA’s downward revision in OPEC production. In addition, Saudi Arabia’s oil minister recently announced that they and other countries may decide to restrain production for the remainder of the year, depending on market balances in June. EIA assumes that joint OPEC/non-OPEC crude oil production cuts will remain in place through the end of 2019.
EIA estimates that Venezuela’s crude oil production in February totaled 1.1 million b/d, down from 1.2 million b/d in January. The decline is a result of both the continuing trend of decreasing Venezuelan production because of the mismanagement of the country’s oil industry and, more recently, U.S. sanctions that were put in place in late January. The production declines that resulted from sanctions are treated as an unplanned outage and are included in the unplanned OPEC production outage data. OPEC and U.S. production levels present considerable uncertainty to oil market balances and price expectations. Recent events occurring after February, including the widespread power outages in Venezuela, are not reflected in this STEO forecast. EIA continues to monitor the evolving situation in Venezuela and future forecasts will reflect these events as they unfold.
Although lower forecast OPEC production will likely put upward pressure on crude oil prices, EIA forecasts that OPEC spare capacity will increase. Increasing spare capacity tends to moderate upward price pressures. EIA forecasts OPEC spare crude oil production capacity to increase from an average of 1.5 million b/d in 2018 to 2.1 million b/d in 2019 and 2.6 million b/d in 2020. If correct, 2019 OPEC spare production capacity would be at the highest level since 2013, and 2020 OPEC spare production capacity would be at the highest levels since 2011.
EIA forecasts that global liquid fuels inventories will rise by 0.2 million b/d in 2019 and by 0.4 million b/d in 2020 (Figure 2). The forecast inventory builds in both years are lower than the forecast builds in the February STEO. The lower forecast inventory builds reflect the lower expected production in both OPEC and the United States.
U.S. average regular gasoline and diesel prices increase
The U.S. average regular gasoline retail price rose nearly 5 cents from the previous week to $2.47 per gallon on March 11, down nearly 9 cents from the same time last year. The Midwest price increased over 7 cents to $2.40 per gallon, the East Coast price increased nearly 5 cents to $2.43 per gallon, the Rocky Mountain price increased over 4 cents to $2.25 per gallon, the Gulf Coast price increased nearly 4 cents to $2.22 per gallon, and the West Coast price increased over 3 cents to $2.98 per gallon.
The U.S. average diesel fuel price rose less than 1 cent from the previous week, remaining at $3.08 per gallon on March 11, over 10 cents higher than a year ago. The Gulf Coast price increased by over 1 cent to $2.88 per gallon, the East Coast price increased less than 1 cent, remaining at $3.12 per gallon, and the West Coast price increased less than 1 cent to $3.51 per gallon. The Midwest price fell less than 1 cent, remaining at $3.01 per gallon. The Rocky Mountain price remained unchanged at $2.94 per gallon.
Propane/propylene inventories decline
U.S. propane/propylene stocks decreased by 1.2 million barrels last week to 50.2 million barrels as of March 8, 2019, 5.1 million barrels (11.3%) greater than the five-year (2014-2018) average inventory levels for this same time of year. Midwest, East Coast, and Rocky Mountain/West Coast inventories decreased by 1.3 million barrels, 0.8 million barrels, and 0.3 million barrels, respectively, while Gulf Coast inventories increased by 1.2 million barrels. Propylene non-fuel-use inventories represented 12.7% of total propane/propylene inventories.
Residential heating fuel prices decrease slightly
As of March 11, 2019, residential heating oil prices averaged almost $3.23 per gallon, less than 1 cent per gallon lower than last week’s price but nearly 17 cents per gallon higher than last year’s price at this time. Wholesale heating oil prices averaged almost $2.13 per gallon, less than 1 cent per gallon lower than last week’s price but nearly 15 cents per gallon higher than a year ago.
Residential propane prices averaged $2.41 per gallon, almost 1 cent per gallon less than last week’s price and nearly 9 cents per gallon less than a year ago. Wholesale propane prices averaged almost $0.84 per gallon, nearly 1 cent per gallon higher than last week but less than 1 cent per gallon below last year’s price.
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Retail prices (dollars per gallon)
| Retail prices | Change from last | ||
|---|---|---|---|
| 03/11/19 | Week | Year | |
| Gasoline | 2.471 | 0.049 | -0.088 |
| Diesel | 3.079 | 0.003 | 0.103 |
| Heating Oil | 3.229 | -0.001 | 0.165 |
| Propane | 2.414 | -0.005 | -0.085 |
Futures prices (dollars per gallon*)
| Futures prices | Change from last | ||
|---|---|---|---|
| 03/08/19 | Week | Year | |
| Crude oil | 56.07 | 0.27 | -5.97 |
| Gasoline | 1.802 | 0.072 | -0.102 |
| Heating oil | 2.000 | -0.001 | 0.113 |
| *Note: Crude oil price in dollars per barrel. | |||
Stocks (million barrels)
| Stocks | Change from last | ||
|---|---|---|---|
| 03/08/19 | Week | Year | |
| Crude oil | 449.1 | -3.9 | 18.1 |
| Gasoline | 246.1 | -4.6 | 1.3 |
| Distillate | 136.4 | 0.4 | 3.3 |
| Propane | 50.159 | -1.212 | 11.339 |