Monday, April 25, 2011

US Short-Term Energy and Summer Fuels Outlook

    West Texas Intermediate (WTI) crude oil spot prices averaged $89 per barrel in February and $103 per barrel in March. The WTI price has continued to rise in recent days, reaching $112 on April 8. Crude oil prices are currently at their highest level since 2008. EIA expects oil markets to continue to tighten over the next two years given expected robust growth in world oil demand and slow growth in supply from non-Organization of the Petroleum Exporting Countries (non-OPEC) countries. These conditions result in an expected drawdown of global petroleum stocks and a call for increasing production from OPEC member countries, which will reduce surplus crude oil production capacity at a time when the disruption of crude oil exports from Libya and continuing unrest in other Middle East and North African (MENA) countries already highlight significant supply risks. Projected WTI prices average $106 in 2011 and $114 per barrel in 2012, increases of $5 per barrel and $9 per barrel, respectively, from last month's Outlook.

    The rise in crude oil prices is reflected in higher petroleum product prices. EIA projects that the retail price of regular-grade motor gasoline will average $3.86 per gallon during this summer’s driving season (the period between April 1 and September 30), up from $2.76 per gallon last summer. EIA forecasts the annual average regular retail gasoline price will increase from $2.78 per gallon in 2010 to $3.70 per gallon in 2011 and to $3.80 per gallon in 2012. Current market prices of futures and options contracts for gasoline suggest a 33-percent probability that the national monthly average retail price for regular gasoline could exceed $4.00 per gallon during July 2011.

Global Crude Oil and Liquid Fuels Consumption. 
World crude oil and liquid fuels consumption grew by an estimated 2.3 million bbl/d in 2010 to a record-high level of 86.7 million bbl/d. EIA expects that world liquid fuels consumption will grow by 1.5 million bbl/d in 2011 and by an additional 1.6 million bbl/d in 2012 . Countries outside the Organization for Economic Cooperation and Development (OECD) will make up almost all of the growth in consumption over the next two years, with the largest increases coming from China, Brazil, and the Middle East. EIA expects that, among the OECD regions, only North America will show growth in oil consumption over the next two years, offsetting declines in OECD Europe and Japan.

The projected increase in gasoline prices suggests that vehicle fueling costs for the average U.S. household will be about $825 higher in 2011 than they were in 2010. According to the 2009 National Household Travel Survey , U.S. households drove an average 20,251 miles with an average passenger car fuel efficiency of 22.6 miles per gallon. Assuming no change in travel or average fuel economy, the increase in the average annual gasoline retail price (all grades) from $2.40 per gallon in 2009 to $2.83 per gallon in 2010 and a projected $3.75 per gallon in 2011 implies an increase in average annual household expenditures on gasoline from $2,150 in 2009 to $2,535 in 2010 and $3,360 in 2011.

At the onset of the summer driving season (April 1) total gasoline stocks, at 215.7 million barrels, are 8.3 million barrels below the level of a year-ago, but still about 1 million barrels more than the previous 5-year average for beginning-of-season stocks. Stock withdrawals have not been a significant motor gasoline supply source for the summer season in recent years and are projected to average 48,000 bbl/d this summer, compared with 26,000 bbl/d last summer.

Continuing strong world demand for distillate fuels is forecast to contribute to continuing high U.S. net exports of distillate fuel averaging 500,000 bbl/d this summer, down slightly from 520,000 bbl/d last summer. In contrast, the United States was a net importer of distillate fuel, averaging 120,000 bbl/d during the summers of 2000 through 2007.

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