EIA Short-term Energy Outlook Highlights | March 2016

The United States Energy Information Administration released its March 2016 Short-term Energy Outlook today. The report notes the average Brent crude oil price averaged $32/barrel during February, $1/barrel above the January average. EIA revised its Brent crude price forecasts to $34/barrel in 2016, down $3 from the previous STEO, and $40/barrel in 2017, down $10/barrel on the month. Lagging demand growth outlooks and resilient production pressured EIA's monthly projections lower.

Crude oil production in the U.S. slipped 80,000 barrels per day during February, and EIA forecasts WTI production to fall to 8.7 million barrels/day in 2016 and 8.2 million barrels/day in 2017. WTI crude oil production averaged an estimated 9.4 million barrels per day in 2015.

Natural gas inventories reported on February 26 were 46% higher than the same time last year and EIA projects natural gas prices at Henry Hub to average $2.25/million British thermal units (MMBtu) in 2016 and $3.02/MMBtu in 2017, down 39 cents and 20 cents per MMBtu, respectively.

Text highlights from EIA follow, or click here to view the March STEO.

Highlights:

  • North Sea Brent crude oil prices averaged $32/barrel (b) in February, a $1/b increase from January.
  • just_EIA-logoBrent crude oil prices are forecast to average $34/b in 2016 and $40/b in 2017, $3/b and $10/b lower than forecast in last month's STEO, respectively. The lower forecast prices reflect oil production that has been more resilient than expected in a low-price environment and lower expectations for forecast oil demand growth.
  • Forecast West Texas Intermediate (WTI) crude oil prices are expected to average the same as Brent in 2016 and 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 June 2016 of $35/b should be considered in the context of recent Nymex contract values for June 2016 delivery suggesting that the market expects WTI prices to range from $24/b to $58/b (at the 95% confidence interval).
  • 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 8.2 million b/d in 2017. EIA estimates that crude oil production in February averaged 9.1 million b/d, which was 80,000 b/d below the January level.
  • Natural gas working inventories were 2,536 billion cubic feet (Bcf) on February 26, 46% higher than during the same week last year and 36% 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 2,288 Bcf, which would be 54% above the level at the same time last year. Henry Hub spot prices are forecast to average $2.25/million British thermal units (MMBtu) in 2016 and $3.02/MMBtu in 2017, compared with an average of $2.63/MMBtu in 2015.
  • Natural gas is expected to fuel the largest share of electricity generation in 2016 at 33%, compared with 32% for coal. This would be the first time that natural gas provides more electricity generation than coal on an annual average basis. In 2017, natural gas and coal are both forecast to fuel 32% of electricity generation. For renewables, the forecast share of total electricity generation supplied by hydropower rises from 6% in 2016 to 7% in 2017, and the forecast share for other renewables increases from 8% in 2016 to 9% in 2017.