The U.S. Energy Information Administration (EIA) on Tuesday released the latest update to its Short Term Energy Outlook. The agency raised its average summer driving season price for a gallon of regular gasoline from $2.21 to $2.27 a gallon, up 2.7% since the last release. Even after the increase, gas prices are now forecast to be 36 cents per gallon lower this summer.

For all of 2016, the EIA is forecasting an average U.S. pump price of $2.13 a gallon, up five cents a gallon from last month’s forecast. The agency’s forecast for 2017 now calls for an average pump price of $2.27 per gallon, up three cents per gallon since last month. The April increases were much larger, calling for a 2016 increase of 14 cents and a 2017 increase of 24 cents.

EIA estimates that crude oil production for the month of May 2016 averaged 8.7 million barrels a day, more than 200,000 barrels a day below the April 2016 level, and about a million barrels a day below the 9.7 million barrel level reached in April 2015. U.S. crude oil production averaged 9.4 million barrels a day in 2015, and the EIA projects that to decline to 8.6 million barrels a day in 2016 and to 8.2 million barrels a day in 2017. Both projections are unchanged from the prior release.

The average price for Brent crude rose to $47 a barrel in May, up $5 a barrel over the April level. EIA attributed the increase to global supply disruptions, rising demand for crude and falling U.S. production.

The price for Brent crude is expected to average $43 a barrel in 2016, rising to $52 a barrel in 2017. The 2016 price forecast rose by $3 a barrel in May and the 2017 forecast rose by $1 a barrel.

West Texas Intermediate (WTI) prices are forecast to average slightly less than Brent prices through this year and then to match Brent prices in 2017.

Regarding oil markets the EIA noted:

The increase in front-month prices contributed to a reduction in the contango (when near-term futures prices are lower than longer-dated ones) for Brent and WTI. The 1st-13th [month] spread narrowed by 59 cents/b[arrel] and 52 cents/b for Brent and WTI, respectively, since May 2. The futures curve for WTI is the narrowest in nearly a year. While U.S. commercial crude inventories remain 58 million barrels above last year, Canadian production outages may be tightening the market in addition to the steadily declining U.S. production. Globally, liquids inventories are still expected to build in the third and fourth quarter of 2016, but EIA projects the builds to be more than 1 million b/d less than those that occurred in third and fourth quarter 2015.

Natural gas working inventories totaled 2.907 trillion cubic feet (Tcf) on May 27, 32% higher than a year earlier, and 35% higher than the previous five-year (2011-15) average for that week. EIA projects natural gas inventories will reach 4.161 Tcf at the end of October 2016, 3 billion cubic feet from the prior month’s projection and the highest end-of-October level on record. Spot prices are forecast to average $2.22 per million BTUs in 2016 and $2.96 per million BTUs in 2017, compared with an average of $2.63 per million BTUs in 2015.

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