In its monthly Short-Term Energy Outlook released today, the U.S. Energy Information Administration (EIA) has raised its average price for a barrel of Brent crude from $105 to $109. The forecast price for a barrel of WTI crude rises to $93 a barrel, compared to a forecast average of $89 a barrel in the January report.

The price of Brent crude is now forecast to fall to $101 a barrel in 2014, which is $2 a barrel higher than the January forecast. The differential between Brent crude and WTI crude averaged $18 a barrel in 2012, and the EIA forecasts that the differential will remain at $16 a barrel this year and drop to $9 a barrel in 2004.

Based on the EIA’s figures, WTI crude will average about $92.81 a barrel in 2013 and $92.17 a barrel in 2014, compared with $94.86 a barrel last year. WTI crude is trading at around $97.50 a barrel today.

The gap in the Brent-WTI differential did not change in the EIA’s forecast, but is near $21 today. What the EIA doesn’t say is that the gap is expected to close by WTI prices rising closer to Brent levels. That is a function of the increasing ability of North American producers to transport crude to markets on the East and Gulf coasts.

The EIA now forecasts that the average retail price of a gallon of gas — which came to $3.63 in 2012 — will fall to an average of $3.55 a gallon this year and $3.39 in 2014. The 2013 forecast price is $0.11 higher than it was last month and the 2014 forecast price is a nickel higher.

Liquid fuel consumption has fallen in the U.S. from 20.8 million barrels a day in 2005 to 18.6 million barrels a day in 2012. The EIA expects consumption to rise to 18.7 million barrels a day in 2014. The gains will come in consumption of diesel fuel and liquefied petroleum gas, with gasoline and jet fuel consumption remaining flat.

Natural gas prices are now expected to rise from an average of $2.75 per million BTUs in 2012 to $3.53 this year and to $3.84 in 2014.

The EIA forecasts are reacting to the sharply higher crude prices we’ve seen in January. Pump prices are rising again, as we noted earlier this morning, and the AAA Fuel Gauge Report now shows an average price per gallon of $3.604 compared to a price of $3.307 just a month ago. Higher gasoline prices could weigh heavily on a continued recovery in the U.S. economy.

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