In an August report, the US Energy Information Administration (EIA) included its short-term energy outlook for oil and gas.
According to the report, crude oil prices increased during the first three weeks of July 2013 as world oil markets tightened in the face of seasonal increases in world consumption, unexpected supply disruptions, and heightened uncertainty over the security of supply with the renewed unrest in Egypt. The EIA expects that the Brent crude oil spot price, which averaged $108 per barrel over the first half of 2013, will average $104 per barrel over the second half of 2013, and $100 per barrel in 2014.
The report also said that the discount of West Texas Intermediate (WTI) crude oil to Brent crude oil, which averaged $18 per barrel in 2012 and increased to a monthly average of $21 per barrel in February 2013, closed below $1.50 per barrel on July 19, and averaged $3 per barrel for the month. The strong demand for light, sweet crude oil in the US Midwest and new pipeline capacity to deliver production from the West Texas Permian Basin directly to the US Gulf Coast contributed to the price of WTI rising relative to Brent crude oil. The EIA expects the WTI discount to widen to $6 per barrel by the end of 2013 as crude oil production in Alberta, Canada, recovers following the heavy June flooding and as US Mid-Continent production continues to grow.
Rising crude oil prices and seasonal demand increases contributed to US regular gasoline retail prices increasing from an average of $3.50 per gallon on July 1 to $3.63 per gallon on August 5. The EIA expects the regular gasoline retail price to average $3.59 per gallon in the third quarter of 2013, and the annual average price to decline from an average of $3.63 per gallon in 2012 to $3.52 per gallon in 2013 and to $3.37 per gallon in 2014.
US crude oil production increased to an average of 7.5 million barrels per day (bbl/d) in July, the highest monthly level of production since 1991. The EIA forecasts US total crude oil production will average 7.4 million bbl/d in 2013 and 8.2 million bbl/d in 2014, both about 0.1 million bbl/d higher than forecast in last month’s short-term energy outlook.
Natural gas working inventories ended July 2013 at an estimated 2.88 trillion cubic feet (Tcf), about 0.37 Tcf below the level at the same time a year ago and 0.04 Tcf below the five-year average (2008-2012). The EIA expects that the Henry Hub natural gas spot price, which averaged $2.75 per million British thermal units (MMBtu) in 2012, will average $3.71 per MMBtu in 2013 and $3.95 per MMBtu in 2014.