The Short-Term Energy Outlook (STEO) released on June 9 forecasts the average price for North Sea Brent crude oil in 2016 at $67 per barrel (b), $3/b lower than projected in the May STEO. The 2015 Brent forecast remained unchanged at $61/b (Figure 1). Expectations of looser global balances in the latter portion of the forecast period drove the adjustment to the price outlook. WTI prices are expected to average $5/b below Brent in both 2015 and 2016.

The current values of futures and options contracts continue to suggest high uncertainty in the price outlook (Market Prices and Uncertainty Report). WTI futures contracts for September 2015 delivery traded during the five-day period ending June 4 averaged $60/b while implied volatility averaged 33%. These levels established the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in September 2015 at $45/b and $81/b, respectively. The 95% confidence interval for WTI market expectations widens over time, with lower and upper boundaries of $40/b and $92/b for December 2015 prices, widening to $36/b and $109/b for December 2016 prices.

Adjustments to the supply-side outlook are the major driver of looser global balances. In the June STEO, forecast global inventory builds average 1.9 million b/d in 2015 and 0.8 million b/d in 2016, a significant change from the previous forecast builds of 1.3 million b/d in 2015 and 0.2 million b/d in 2016. EIA now forecasts greater oil supply than it did last month. Coupled with little to no change to the demand growth forecast compared with last month’s projections, the greater supply likely will lead to larger inventories. Production growth outside of OPEC (Organization of the Petroleum Exporting Countries) continues to largely reflect U.S. and Canadian output. Projected U.S. crude oil production in the June STEO averages 9.4 million b/d in 2015 and 9.3 million b/d in 2016, an increase of 0.2 million b/d in 2015 and 0.1 million b/d in 2016 from last month’s STEO, primarily because of upward revisions to estimated production data from the fourth quarter of 2014 and the first quarter of 2015. Canadian production is also expected to be higher than previously estimated despite recent outages because of wildfires in Alberta.

In the June STEO, OPEC crude oil production is expected to rise by 0.6 million b/d in 2015 and fall by 0.2 million b/d in 2016. At the June 5 OPEC meeting, the group did not change its 30 million b/d crude oil production target. EIA forecasts OPEC crude oil production will continue to exceed that target over the forecast period, contributing to the expected continued global inventory builds.

The outlook for global consumption of petroleum and other liquids is largely unchanged in the June forecast compared with last month’s. After growing by 0.9 million barrels per day (b/d) in 2014 versus 2013, year-over-year growth is expected to be 1.3 million b/d in both 2015 and 2016. The modest increase in the 2015 demand forecast reflects sustained lower oil prices and sustained U.S. employment growth stimulating demand more than previously expected. Projected global real gross domestic product (GDP) weighted for oil consumption, which increased by an estimated 2.8% in 2014, is projected to grow by 2.4% in 2015 and by 3.0% in 2016.

Average U.S. retail gasoline prices unchanged, diesel fuel prices decrease

The U.S. average retail price of regular gasoline is unchanged from last week and remains $2.78 per gallon as of June 8, 2015, 89 cents per gallon lower than the same time last year. The West Coast price decreased seven cents to $3.38 per gallon, while the Midwest price was down two cents to $2.68 per gallon. The Gulf Coast price increased five cents to $2.54 per gallon. The East Coast and Rocky Mountain prices each increased two cents, to $2.69 per gallon and $2.76 per gallon, respectively.

The U.S. average diesel fuel price fell three cents from the week prior to $2.88 per gallon, down $1.01 per gallon from the same time last year. The West Coast price decreased four cents to $3.12 per gallon, and the Midwest price was down three cents to $2.77 per gallon. The East Coast and Gulf Coast prices each decreased two cents, to $2.98 per gallon and $2.78 per gallon, respectively. The Rocky Mountain price decreased one cent to $2.83 per gallon.

Propane inventories gain

U.S. propane stocks increased by 1.7 million barrels last week to 78.8 million barrels as of June 5, 2015, 29.6 million barrels (60.1%) higher than a year ago. Midwest inventories increased by 1.0 million barrels and East Coast inventories increased by 0.6 million barrels. Rocky Mountain/West Coast inventories increased by 0.1 million barrels while Gulf Coast inventories remained unchanged. Propylene non-fuel-use inventories represented 6.8% of total propane inventories.