The March Short-Term Energy Outlook (STEO) from EIA turns its attention away from home heat and onto summer driving and crude oil. The report forecasts a U.S. summertime gasoline price (April-Sept.) at a national average of $3.57 per gallon, with the annual high projected at $3.66/gallon in May. By September, EIA expects gasoline prices to average $3.46 nationally, with 2015 prices projected lower from there. The projected 2014 annual average gasoline price is $3.45/gallon 6 cents below the 2013 average price of $3.51/gallon.
Brent crude oil averaged $110.00/bbl in March for the ninth consecutive month with WTI also steady around $101.00. Supporting WTI prices is new pipeline capacity that moves supplies from the storage hub at Cushing, OK to export terminals at the Gulf. That has resulted in Cushing crude inventories at their lowest levels since 2009. EIA expects the average WTI/Brent crude spread to widen to an average of $9.00 in 2014, and $11.00 in 2015, with Brent to stay at premium.
Natural gas inventories ended March 52% below year-ago levels and 55% below the five-year average supply. Prices were wildly volatile throughout the winter ranging from $3.95 in January to $8.15/MMBtu in February. Record storage withdrawals amid widespread winter weather and frigid temperatures spurred the price increases, and as inventory levels are recharged, prices are expected to moderate. However, EIA projects the 2014 Henry Hub average natural gas spot price at $4.44/MMBtu -- up from 2013's $3.73, and below 2015's forecast $4.11.
Full text highlights from EIA's March STEO follow...
- During the April-through-September summer driving season this year, regular gasoline retail prices are forecast to average $3.57/gallon (gal). The projected monthly national average regular retail gasoline price falls from $3.66/gal in May to $3.46/gal in September. EIA expects regular gasoline retail prices to average $3.45/gal in 2014 and $3.37/gal in 2015, compared with $3.51/gal in 2013. The July 2014 New York Harbor reformulated blendstock for oxygenate blending (RBOB) futures contract averaged $2.85/gal for the five trading days ending April 3, 2014. Based on the market value of futures and options contracts for this key petroleum component of gasoline, there is a 3% probability that its price at expiration will exceed $3.35/gal, consistent with a monthly average regular-grade gasoline retail price exceeding $4.00/gal in July 2014 (see EIA Summer Fuels Outlook slideshow).
- The North Sea Brent crude oil spot price in March averaged near $110 per barrel (bbl) for the ninth consecutive month, while West Texas Intermediate (WTI) crude oil prices remained flat near $101/bbl. New pipeline capacity from the Midwest into the Gulf Coast helped reduce inventories at the Cushing, Oklahoma, storage hub to 27 million barrels by the end of March 2014, the lowest level since November 2009. The discount of WTI crude oil to Brent crude oil, which averaged more than $13/bbl from November through January, fell to $7/bbl in March. EIA expects the WTI discount to average $9/bbl in 2014 and $11/bbl in 2015.
- Natural gas working inventories on March 28, 2014, were 0.82 trillion cubic feet (Tcf), 0.88 Tcf (52%) below the level at the same time a year ago and 0.99 Tcf (55%) below the five-year average (2009-13). Henry Hub natural gas spot prices were volatile over the past few months, increasing from $3.95 per million British thermal units (MMBtu) on January 10 to a high of $8.15/MMBtu on February 10, before falling back to $4.61/MMBtu on February 27, and then bouncing back up to $7.98/MMBtu on March 4. EIA expects that the Henry Hub natural gas spot price, which averaged $3.73/MMBtu in 2013, will average $4.44/MMBtu in 2014 and $4.11/MMBtu in 2015.
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