This edition of the Short-Term Energy Outlook is the first to include forecasts for 2016.
December was the sixth consecutive month in which monthly average Brent prices decreased, falling $17/barrel (bbl) from November to a monthly average of $62/bbl, the lowest since May 2009. The December price decline reflects continued growth in U.S. tight oil production, strong global supply, and weakening outlooks for the global economy and oil demand growth.
EIA forecasts that Brent crude oil prices will average $58/bbl in 2015 and $75/bbl in 2016, with annual average West Texas Intermediate (WTI) prices expected to be $3/bbl to $4/bbl below Brent. The current values of futures and options contracts suggest very high uncertainty in the price outlook (Market Prices and Uncertainty Report). WTI futures contracts for April 2015 delivery, traded during the five-day period ending January 8, averaged $51/bbl, establishing the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in April 2015 at $34/bbl and $76/bbl, respectively. The 95% confidence interval for market expectations widens considerably over time, with lower and upper limits of $28 and $112 for prices in December 2015.
Total U.S. crude oil production averaged an estimated 9.2 million barrels per day (bbl/d) in December. Forecast total crude oil production averages 9.3 million bbl/d in 2015. Under EIA's price forecast, projected crude oil production averages 9.5 million bbl/d in 2016, which would be the second-highest annual average level of production in U.S. history; the highest was 9.6 million bbl/d in 1970.
Driven largely by falling crude oil prices, U.S. weekly regular gasoline retail prices averaged $2.14/gallon (gal) on January 12, the lowest since May 4, 2009. U.S. regular gasoline retail prices are projected to average $2.16/gal in the first quarter of 2015. EIA expects U.S. regular gasoline retail prices, which averaged $3.36/gal in 2014, to average $2.33/gal in 2015. The average household is now expected to spend about $750 less for gasoline in 2015 compared with last year because of lower prices. The projected regular gasoline retail price increases to an average of $2.72/gal in 2016.
Natural gas working inventories on January 2 totaled 3.09 trillion cubic feet (Tcf), 0.25 Tcf (9%) above the level at the same time a year ago and 0.07 Tcf (2%) below the previous five-year average (2010-14). EIA expects the Henry Hub natural gas spot price to average $3.52/million British thermal units (MMBtu) this winter compared with $4.51/MMBtu last winter, reflecting both lower-than-expected space heating demand and higher natural gas production this winter. Turning to annual measures, EIA expects the Henry Hub natural gas spot price to average $3.44/MMBtu in 2015 and $3.86/MMBtu in 2016, compared with $4.39/MMBtu in 2014.