Oil Trades Near 10-Month High as Falling U.S. Supplies Trim Glut
Short-Term Energy Outlook
- Benchmark North Sea Brent crude oil spot prices averaged $47/barrel (b) in May, a $5/b increase from April and the fourth consecutive monthly increase since reaching a 12-year low of $31/b in January. Growing global oil supply disruptions, rising oil demand, and falling U.S. crude oil production contributed to the price increase.
- Brent crude oil prices are forecast to average $43/b in 2016 and $52/b in 2017, $3/b and $1/b higher than forecast in last month’s STEO, respectively. West Texas Intermediate (WTI) crude oil prices are forecast to be slightly lower than Brent in 2016 and to be the same as Brent in 2017. However, the current values of futures and options contracts suggest high uncertainty in the price outlook. For example, EIA’s forecast for the average WTI price in September 2016 of $46/b should be considered in the context of Nymex contract values for September 2016 delivery. These contracts traded during the five-day period ending June 2 (Market Prices and Uncertainty Report) suggest the market expects WTI prices could range from $36/b to $69/b (at the 95% confidence interval) in September 2016.
- During the April-through-September summer driving season of 2016, U.S. regular gasoline retail prices are forecast to average $2.27/gallon (gal), 6 cents/gal higher than forecast in last month’s STEO but 36 cents/gal lower than last summer. U.S. regular gasoline retail prices are forecast to average $2.13/gal in 2016 and $2.27/gal in 2017, which are 5 cents/gal higher and 3 cents/gal higher than forecast in last month’s STEO, respectively.
- U.S. crude oil production averaged 9.4 million barrels per day (b/d) in 2015. Production is forecast to average 8.6 million b/d in 2016 and 8.2 million b/d in 2017, both unchanged from last month’s STEO. EIA estimates that crude oil production for May 2016 averaged 8.7 million b/d, which is more than 0.2 million b/d below the April 2016 level, and approximately 1 million b/d below the 9.7 million b/d level reached in April 2015.
- Natural gas working inventories were 2,907 billion cubic feet (Bcf) on May 27. This level is 32% higher than a year earlier, and 35% higher than the previous five-year (2011-15) average for that week. The natural gas storage injection season typically runs from April through October. EIA projects that natural gas inventories will be 4,161 Bcf at the end of October 2016, which would be the highest end-of-October level on record. Henry Hub spot prices are forecast to average $2.22/million British thermal units (MMBtu) in 2016 and $2.96/MMBtu in 2017, compared with an average of $2.63/MMBtu in 2015.