Noting that gasoline prices fell by seven cents a gallon from February 25th to March 11th, the EIA expects gasoline prices to remain near the February average price of $3.67 a gallon for the next few months, but the average price to decline from a 2012 annual average of $3.63 a gallon to $3.55 a gallon this year and decline further to $3.38 a gallon in 2014.
The EIA now forecasts that WTI crude oil will average just under $92 a barrel in 2013, down from last month’s forecast for an average price of $93 a barrel. The agency also lowered its forecast price for Brent, from a 2013 average of $109 a barrel to $108. For 2014, the EIA forecasts WTI will average just over $92 a barrel, while Brent will average under $101 a barrel next year.
The price differential (spread) between Brent and WTI will average $16 a barrel this year and fall to $9 a barrel in 2014. The EIA believes that new pipeline capacity becoming available in the U.S. will cut the spread by moving lower cost WTI from mid-America to the Gulf Coast and thereby reduce the price of Brent.
The agency also forecasts U.S. consumption to rise slightly from 18.6 million barrels a day in 2012 to 18.7 million barrels a day by 2014. The increase is attributed to rising demand for distillates and liquefied petroleum gas (LPG). No significant change is forecast for either gasoline or jet fuel consumption.
U.S. crude oil production rose to more than 7 million barrels a day in November and December of 2012, the highest level since 1992. The EIA forecasts average production for 2013 to rise from last year’s average of 6.5 million barrels a day to 7.3 million barrels a day. Production will increase further, to 7.9 million barrels a day in 2014.