The U.S. Energy Information Administration updated its short-term energy outlook today. The report expects gasoline prices to steadily decline over the next two years along with Brent crude. Liquid fuels consumption and crude production are projected higher and natural gas prices are also expected to rise.
The weekly U.S. average regular gasoline retail price fell in early March for the first time since mid-December. The March 11 average was $3.71 per gallon, down $0.07 per gallon from February 25. EIA expects that lower crude oil prices will result in monthly average regular gasoline prices staying near the February average of $3.67 per gallon over the next few months, with the annual average regular gasoline retail price declining from $3.63 per gallon in 2012 to $3.55 per gallon in 2013 and $3.38 per gallon in 2014.
Total U.S. liquid fuels consumption fell from 20.8 million bbl/d in 2005 to 18.6 million bbl/d in 2012. EIA expects total consumption to rise slightly over the next two years to an average of 18.7 million bbl/d in 2014, driven by increases in distillate fuel and liquefied petroleum gas consumption, with little change in gasoline and jet fuel consumption.
Currently, the national average price for gasoline is at $3.710 per gallon -- down $0.049 from the previous week -- $0.119 below year-ago. Highway diesel at $4.088 nationally, down $0.042 on the week -- $0.035 below year-ago. Inputs Monitor reports farm diesel at $3.64 this week -- after climbing for the entire month of February, the uptrend continues, adding $0.058 last week.
Crude Oil --
EIA expects that the Brent crude oil spot price, which averaged $112 per barrel in 2012 and rose to $119 per barrel in early February 2013, will average $108 per barrel in 2013 and $101 per barrel in 2014. The projected discount of West Texas Intermediate (WTI) crude oil to Brent, which increased to a monthly average of more than $20 per barrel in February 2013, will average $16 per barrel in 2013 and $9 per barrel in 2014, as planned new pipeline capacity lowers the cost of moving mid-continent crude oil to the Gulf Coast refining centers.
U.S. crude oil production exceeded an average level of 7 million barrels per day (bbl/d) in November and December 2012, the highest volume since December 1992. EIA estimates that U.S. total crude oil production averaged 6.5 million barrels per day (bbl/d) in 2012, an increase of 0.8 million bbl/d from the previous year. Projected domestic crude oil production is expected to average 7.3 million bbl/d in 2013 and 7.9 million bbl/d in 2014.
Natural Gas --
Natural gas working inventories ended February 2013 at an estimated 2.08 trillion cubic feet (Tcf), about 0.36 Tcf below the level at the same time a year ago but still 0.27 Tcf greater than the 5-year average (2008-12). EIA expects the Henry Hub natural gas spot price, which averaged $2.75 per million British thermal units (MMBtu) in 2012, will average $3.41 per MMBtu in 2013 and $3.63 per MMBtu in 2014. Current options and futures prices imply that the lower and upper bounds for the 95-percent confidence interval for June 2013 contracts at $2.79 per MMBtu and $4.67 per MMBtu, respectively.