US Summer Gasoline Prices Projected at 11-Year Low

According to the EIA, pump prices for the summer driving season (April through September) are expected to average $2.45 a gallon, compared with $3.59 a gallon in the same period last year. That calculates to year-over-year savings of $700 per household, and the lowest spending on motor fuel in the past 11 years.

The EIA is forecasting an average per barrel price for West Texas Intermediate (WTI) crude $52.48 in 2015, down from an average of $93.26 in 2014. The 2015 price for a barrel of Brent crude is now estimated at $59.32, down from $99 a barrel in 2014. For 2016 the EIA forecasts the WTI price at $70 a barrel and the Brent price at $75.03 per barrel.

U.S. production is forecast to fall from 9.37 million barrels of crude oil per day in April and May to 9.33 million barrels a day in June. The EIA expects production to bottom out at 9.04 million barrels a day in September, before climbing in the final three months of this year. Production in 2016 bounces around from 9.17 million barrels a day in January to 9.68 million barrels a day in December.

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The potential lifting of sanctions against Iran could cut the baseline projection for crude oil prices by $5 to $15 a barrel below the levels in the EIA’s latest forecast. Iran is thought to have some 30 million barrels of crude in storage and could ramp up production by a minimum of 700,000 barrels a day by the end of 2016.

For oil producers, Iran’s return to the market could not come at a worse time. The EIA projects global inventory growth will drop from a million barrels a day in 2015 to just 100,000 barrels a day in 2016. The agency concludes that Iran could add half a million barrels a day to the global supply, putting more downward pressure on pricing.