EIA expects higher gasoline prices for driving season, full year

During the April-September summer driving season this year in the US, regular gasoline retail prices will average $3.66/gal, 8¢/gal higher than last year and 4¢ higher than projected last month, according to a forecast from the US Energy Information Administration in its July Short-Term Energy Outlook (STEO).

As lower refinery margins more than offset higher crude oil prices, regular gasoline retail prices are projected to fall from an average of $3.68/gal during the second quarter to $3.64/gal during the third quarter. EIA expects regular gasoline retail prices to average $3.54/gal in 2014 and $3.45/gal in 2015. This compares to the agency’s forecasts of $3.50/gal in 2014 and $3.38/gal in 2015 in last month’s STEO.

In the recent monthly outlook, total US liquid fuels consumption is expected to average 18.88 million b/d in 2014, 50,000 b/d lower than projected in June, and 18.95 million b/d in 2015, compared with 18.89 million b/d in 2013.

EIA forecasts that motor gasoline consumption will rise by 30,000 b/d in 2014 and then fall by 10,000 b/d in 2015 as the recent strong growth as improving fuel economy in new vehicles increasingly offsets highway travel growth. Consumption of distillate fuel is expected to rise by 120,000 b/d and 60,000 b/d in 2014 and 2015, respectively. However, increases in distillate fuel and gasoline are likely to be offset by declines in the consumption of residual fuel oil and unfinished oils.

In its report, EIA forecasts total US crude oil production to increase to 8.5 million b/d in 2014 and 9.3 million b/d in 2015 from an estimated 7.4 million b/d in 2013. More than 60% of EIA’s forecast production growth for 2014 and 2015 consists of light, sweet grades with API gravity of 40° or higher.

Natural gas liquids production is projected to rise from 2.6 million b/d in 2013 to 3 million b/d in 2015. “About half of this growth is expected to come from ethane production to meet growing demand associated with expanding domestic ethylene production and export capacity,” EIA said.

Petroleum imports are expected to continue to decline due to strong growth in US production. The share of total US liquid fuels consumption met by net import is expected to decline to 22% in 2015—the lowest level since 1970.

Global oil market

EIA estimates that world petroleum and other liquids consumption rose by 1.3 million b/d in 2013, averaging 90.5 million b/d for the year. Global consumption is expected to increase by 1.1 million b/d in 2014 and 1.5 million b/d in 2015, EIA said. Countries outside of the Organization for Economic Cooperation and Development account for nearly all of the expected consumption growth in 2014 and 2015. China will continue to lead the growth, albeit at a slower rate compared with rates before 2012.

Oil production outside of the Organization of the Petroleum Exporting Countries is expected to average 55.84 million b/d in 2014 and 56.81 million b/d in 2015, vs. 54.1 million b/d in 2013. Production from the US and Canada will rise by a combined annual average of 1.6 million b/d in 2014 and 1 million b/d in 2015.

EIA projects OPEC crude oil production to fall by 300,000 b/d in 2014 and by an additional 100,000 b/d in 2015. According to EIA data, OPEC crude oil production in 2013 average 29.9 million b/d, a decline of 1 million b/d from the previous year, reflecting increased outages in Libya, Nigeria, and Iraq, along with strong non-OPEC supply growth.

Crude oil prices

Unrest in Iraq put upward pressure on world oil prices last month, helping North Sea Brent crude oil spot prices reach their highest daily level of the year at just over $115/bbl on June 19. North Sea Brent crude oil spot prices increased from a monthly average of $110/bbl in May to $112/bbl in June.

This was the 12th consecutive month in which the average Brent crude oil spot price ranged between $107/bbl and $112/bbl. EIA projects Brent crude oil prices to average $110/bbl in 2014 and $105/bbl in 2015, $2/bbl and $3/bbl higher, respectively, than projected in last month’s STEO. West Texas Intermediate crude oil’s price discount to Brent is expected to average $9/bbl and $10/bbl in 2014 and 2015, respectively.