EIA | Short-term Energy Outlook Lowers Oil Price Forecast

January 13, 2016 12:59 PM

The U.S. Energy Information Administration released its first Short-term energy Outlook of 2016 this week and made some major adjustments to crude oil and national average gasoline price forecasts. The report projects Brent crude oil prices to average $40/barrel in 2016, a $16 decline from the prior month's report. Lower global crude prices are expected to weigh on the national average gasoline price which EIA forecasts to place a low in February 2016 at $1.90 per gallon. EIA continued to trim U.S. crude oil production forecasts with 2016 down 100,000 barrels per day at 8.7 million barrels per day, and 2017 averaging 8.5 million barrels per day. Despite natural gas inventories 15% above the five year average, EIA projects natural gas spot prices will increase to a 2016 average of $2.65 per million Btu. The report also forecasts an increase in the amount of power generated by renewable resources to climb as coal and natural gas fired power generation will decline incrementally.

Complete text highlights from EIA's January 2016 Short-term Energy Outlook follow or click here to view the full report on EIA.gov...

Short-Term Energy Outlook
January 12, 2016 Release

Highlights

  • This edition of the Short-Term Energy Outlook is the first to include forecasts for 2017.
  • North Sea Brent crude oil prices averaged $38/barrel (b) in December, a $6/b decrease from November, and the lowest monthly average price since June 2004. Brent crude oil prices averaged $52/b in 2015, down $47/b from the average in 2014, as growth in global liquids inventories put downward pressure on Brent prices throughout much of the year.just_EIA-logo
  • Forecast Brent crude oil prices average $40/b in 2016 and $50/b in 2017. Forecast West Texas Intermediate (WTI) crude oil prices average $2/b lower than Brent in 2016 and $3/b lower in 2017. However, the current values of futures and options contracts continue to suggest high uncertainty in the price outlook. For example, EIA's forecast for the average WTI price in April 2016 of $37/b should be considered in the context of recent contract values for April 2016 delivery suggesting that the market expects WTI prices to range from $25/b to $56/b (at the 95% confidence interval).
  • The price of U.S. retail regular gasoline is forecast to average $2.03/gallon (gal) in 2016 and $2.21/gal in 2017, compared with $2.43/gal in 2015. In December, average retail regular gasoline prices were $2.04/gal, a decrease of 12 cents/gal from November and 51 cents/gal lower than in December 2014. EIA expects monthly retail prices of U.S. regular gasoline to reach a seven-year low of $1.90/gal in February 2016, before rising during the spring.
  • U.S. crude oil production averaged an estimated 9.4 million barrels per day (b/d) in 2015, and it is forecast to average 8.7 million b/d in 2016 and 8.5 million b/d in 2017. EIA estimates that crude oil production in December fell 80,000 b/d from the November level.
  • Natural gas working inventories were 3,643 billion cubic feet (Bcf) on January 1, which was 17% higher than during the same week last year and 15% higher than the previous five-year average (2011-15) for that week. EIA forecasts that inventories will end the winter heating season (March 31) at 2,043 Bcf, which would be 38% above the level at the same time last year. Forecast Henry Hub spot prices average $2.65/million British thermal units (MMBtu) in 2016 and $3.22/MMBtu in 2017, compared with an average of $2.63/MMBtu in 2015.
  • A decline in power generation from fossil fuels in the forecast period is offset by an increase from renewable sources. The share of generation from natural gas falls from 33% in 2015 to 31% in 2017, and coal falls from 34% to 33%. For renewables, the forecast share of total generation supplied by hydropower rises from 6% in 2015 to 7% in 2017, and the forecast share for other renewables increases from 7% in 2015 to 9% in 2017.