Benchmark North Sea Brent crude oil spot prices averaged US$47/bbl (b) in May, a US$5/bbl increase from April and the fourth consecutive monthly increase since reaching a 12 yr low of US$31/bbl in January. Growing global oil supply disruptions, rising oil demand, and falling US crude oil production contributed to the price increase.
Brent crude oil prices are forecast to average US$43/bbl in 2016 and US$52/bbl in 2017, US$3/bbl and US$1/bbl higher than forecast in last month’s STEO, respectively. West Texas Intermediate (WTI) crude oil prices are forecast to be slightly lower than Brent in 2016 and to be the same as Brent in 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 September 2016 of US$46/bbl should be considered in the context of Nymex contract values for September 2016 delivery. These contracts traded during the five-day period ending June 2 suggest the market expects WTI prices could range from US$36/bbl to US$69/bbl (at the 95% confidence interval) in September 2016.
During the April-through-September summer driving season of 2016, US regular gasoline retail prices are forecast to average US$2.27/gal, 6 cents/gal higher than forecast in last month’s STEO but 36 cents/gal lower than last summer. U.S. regular gasoline retail prices are forecast to average US$2.13/gal in 2016 and US$2.27/gal in 2017, which are 5 cents/gal higher and 3 cents/gal higher than forecast in last month’s STEO, respectively.
US crude oil production averaged 9.4 million bpd in 2015. Production is forecast to average 8.6 million bpd in 2016 and 8.2 million bpd in 2017, both unchanged from last month’s STEO. EIA estimates that crude oil production for May 2016 averaged 8.7 million bpd, which is more than 0.2 million bpd below the April 2016 level, and approximately 1 million bpd below the 9.7 million bpd level reached in April 2015.
Natural gas working inventories were 2907 billion ft3 on 27 May. This level is 32% higher than a year earlier, and 35% higher than the previous five yr (2011–15) average for that week. The natural gas storage injection season typically runs from April through October. EIA projects that natural gas inventories will be 4161 Bcf at the end of October 2016, which would be the highest end-of-October level on record. Henry Hub spot prices are forecast to average US$2.22/million Btu) in 2016 and US$2.96 million Btu in 2017, compared with an average of US$2.63 million Btu in 2015.