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Highlights: EIA short term energy outlook

Hydrocarbon Engineering,

Below are highlights from the EIA’s most recent short term energy outlook (STEO).

Iranian sanctions

On April 2 2015, Iran and the five permanent members of the UN Security Council as well as Germany reached a framework agreement that could result in the lifting of oil related sanctions against Iran. Lifting the sanctions could substantially change the STEO forecast for oil supply, demand, and prices by allowing a significantly increased volume of Iranian bbls to enter the global market. If and when the sanctions are lifted, the baseline forecast for world crude oil prices in 2016 could be reduced to US$5 – 15/bbl.

Iran is thought to hold approximately 30 million bbls in storage, and the EIA believes that Iran has the technical capability to ramp up crude oil production by at least 700 000 bpd by the end of next year. The pace and magnitude at which those volumes would reach the market would however depend on the terms of a final agreement.

Oil prices

During March, North Sea Brent crude oil prices averaged US$56/bbl, a drop of US$2/bbl from February levels. The EIA forecasts that Brent crude oil will average US$59/bbl this year and US$75/bbl next year, both unchanged from the previous STEO. WTI prices this year and next are expected to average US$7/bbl and US$5/bbl below Brent. The current volumes of futures and options contracts continue to suggest very high uncertainty in the oil price market. Although WTI futures contracts for the broadly held December 2015 delivery traded during the five day period ending April 2 averaged US$52/bbl, the market’s expectations for monthly average WTI prices in that month ranges from US$32 – 97/bbl.

Gasoline prices

For the April – September driving season for this year, regular gasoline retail prices are forecast to average US$2.45/gal. compared with US$3.59/gal. last summer. Based on EIA’s gasoline price forecast, the average US household is expected to spend approximately US$700 less on gasoline this year compared with 2014, as annual motor fuel expenditures are on track to fall to their lowest level in 11 years.

Natural gas

On March 27, natural gas working inventories were 1461 billion ft3, 75% higher than a year earlier, but 12% lower than the previous five year 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 3781 billion ft3, a net injection of 2310 billion ft3. This would be the fourth highest injection season on record, but it would be 420 billion ft3 lower than last year’s net April – October injection.

Edited from press release by Claira Lloyd

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