The U.S. Energy Information Administration (EIA) on Tuesday released the latest update to its Short Term Energy Outlook (STEO). The agency lowered its average summer driving season price for a gallon of regular gasoline from $2.25 to $2.19. After the decrease, gas prices are now forecast to be 44 cents per gallon below last summer’s average price.
By the end of 2016 the EIA is forecasting an average U.S. pump price of $2.15 a gallon. The 2016 annual average is now forecast at $2.13 a gallon, up a penny from last month’s forecast. The agency’s forecast for 2017 now calls for an average pump price of $2.27 per gallon, up a penny per gallon since last month.
Crude oil production estimates call for an average of 8.84 million barrels a day in 2016 and 8.73 million barrels a day in 2017. Compared with last month’s estimates 2016 production is now forecast higher by 110,000 barrels a day and 2017 production is forecast 140,000 barrels a day higher.
U.S. crude oil production is forecast to drop by 6.1% in 2016, compared with 2015, and to drop 1.3% year over year in 2017. Both estimates have been reduced since the September STEO, when 2016 production was forecast to fall by 7.2% this year and an additional 1.7% next year.
The EIA now forecasts a 2016 average price of $43.30 a barrel for Brent and $42.84 for West Texas Intermediate (WTI) crude oil. The Brent average has fallen by 13 cents per barrel since last month’s report, and the WTI average is up six cents a barrel. For 2017 the price is expected to rise to $50.91 a barrel for Brent and $49.91 for WTI.
Regarding oil markets the EIA said:
Global petroleum inventories are expected to build through the second quarter of 2017, but there is significant regional variation in that forecast. In the United States, total oil inventories are expected to decline in the fourth quarter of 2016 and first quarter of 2017. However, these U.S. draws are more than offset by inventory builds in other countries in the Organization for Economic Cooperation and Development (OECD) and in the rest of the world, contributing to expected global inventory builds through the first half of 2017.
WTI for December delivery traded up about 0.6% around $45.20 after touching a high of $45.26 earlier Tuesday morning. Brent for January delivery traded up about 0.2% at $46.25, after posting an intra-day high of $46.69 earlier.