The U.S. Energy Information Administration (EIA) on Tuesday released the latest update to its Short-Term Energy Outlook (STEO). The EIA is forecasting an average U.S. pump price for 2017 of $2.39 per gallon of regular gasoline, down seven cents from the previous forecast. The 2016 summer average was $2.23 per gallon.
Rising pump prices have followed on higher prices for crude oil. The annual average price of regular gasoline in 2017 is forecast to be $2.34 a gallon. That’s 19 cents more per gallon than the 2016 annual average and would result in the average U.S. household spending about $160 more on motor fuel in 2017.
Crude oil production estimates call for an average of 9.3 million barrels a day in 2017, up from 9.2 million barrels in last month’s forecast. 2016 production averaged 8.9 million barrels a day. The EIA also raised its production forecast for 2018 from 9.9 million barrels a day to “almost” 10 million barrels.
The May report also changes to the EIA’s earlier estimates for crude oil and refined product pricing for 2017. WTI crude oil averaged $43.33 a barrel in 2016 and is forecast to rise to an average of $50.68 in 2017, down $1.56 a barrel compared with last month’s estimate for 2017. The average price for Brent crude is forecast to rise from $43.73 in 2016 to $52.60 this year, down $1.63 from the April estimate. WTI crude is forecast to average $55.10 a barrel in 2018, while Brent is forecast at $57.10. Both estimates were unchanged month over month.
The EIA now estimates U.S. commercial crude oil inventories declined by 7.4 million barrels during April, compared with an average increase of 7.4 million barrels over the past five years. The decline in U.S. crude oil inventories is likely due to the increase in gross inputs to refineries in April. Refinery inputs reached 17.2 million b/d in April, the highest on record for any month.
Regarding the global rebalancing of the crude oil market the EIA said:
Because of a lag between the deployment of drilling rigs and realized oil production, recent rig increases indicate that U.S. oil production will likely rise further in the coming months. Expectations of supply growth in 2017, particularly in the United States, as well as concerns that a potential extension of the agreement will not reduce global inventories as quickly as expected contributed to a sharp drop in crude oil prices in the first week in May.
WTI for June delivery traded down more than 1% at around $45.90, after touching a high of $46.78 earlier Tuesday morning. Brent crude for July delivery also traded down about 1% at $48.83, after posting an intra-day high of $49.72 earlier. For the year to date, the price of a barrel of WTI is down 18.7% and the price of Brent crude is down 16.8% per barrel.