North Sea Brent crude oil prices averaged US$60/bbl in April, a US$4/bbl increase from March and the highest monthly average of 2015. Despite increasing global inventories, several factors contributed to higher prices in April, including indications of higher global oil demand growth, expectations for declining U.S. tight oil production in the coming months, and the growing risk of unplanned supply outages in the Middle East and North Africa.
EIA forecasts that Brent crude oil prices will average US$61/bbl in 2015 and US$70/bbl in 2016, US$1/bbl higher and US$5/bbl lower than in last month's STEO, respectively. Average WTI prices in 2015 and 2016 are expected to be US$6/bbl and US$5/bbl below Brent, respectively. The current values of futures and options contracts for December 2015 delivery suggest the market's expectations (at the 95% confidence interval) for WTI prices in that month range from US$41/bbl to US$97/bbl.
While U.S. monthly average regular gasoline retail prices in April were almost unchanged from March at US$2.47/gallon, U.S. weekly regular gasoline retail prices reached an average of US$2.69/gal on May 11, reflecting rising crude oil prices and several outages at West Coast refineries. EIA expects U.S. regular gasoline retail prices, which averaged US$3.36/gal in 2014, to average US$2.43/gal in 2015 and US$2.63/gal in 2016. The average household is expected to spend US$675 less for gasoline in 2015 compared with last year because of lower prices.
Total U.S. crude oil production averaged an estimated 9.3 million bpd in March, but it is expected to decline from June through September before growth resumes. Given EIA's price forecast, projected total crude oil production averages 9.2 million b/d in both 2015 and 2016, 40 000 bpd (0.5%) and 100 000 b/d (1.1%) lower than in last month's STEO, respectively.
Natural gas working inventories were 1786 billion cubic feet (Bcf) on May 1, which was 71% higher than a year earlier, but 4% lower than the previous five-year (2010-14) average. The winter withdrawal season typically ends in March, and April is typically the beginning of the injection season, which runs through October. EIA projects natural gas inventories will end October 2015 at 3890 Bcf, a net injection of 2420 Bcf. This would be the second-highest injection season on record.
Low natural gas prices in recent months have significantly increased the use of natural gas rather than coal for electricity generation. EIA expects natural gas generation in April and May will almost reach the level of coal generation, resulting in the closest convergence in generation shares between the two fuels since April 2012.
Adapted from press release by Joseph Green