Short Term Energy Outlook -- EIA -- April 10, 2018

Summer Fuels Outlook:

• EIA is forecasting retail prices for regular-grade gasoline to average $2.74 during the summer of 2018, which tops last summer’s average by 32 cents. The forecast attributes this increase, in large part, to higher Brent crude oil prices, which are reaching average spot prices not approached since 2014.
• Increased prices throughout 2018 will likely increase annual U.S. household spending on motor gasoline by about $190, approximately 9% higher when compared with 2017. This increase would mark the second consecutive year that consumers experience higher motor fuel-related expenses, following annual declines from 2014 to 2016.
• Despite higher prices, EIA’s forecast expects gasoline consumption to increase in 2018. Americans are set to consume roughly 9.6 million barrels per day throughout the summer of 2018, which would be an increase of about 20,000 barrels per day from last summer’s record average.
• Consumers could see higher electricity bills this summer because temperatures are forecast to be a bit hotter than last summer. The short-term outlook expects residential electricity bills to average $142 per month, which would be up from last summer’s average by 3.4%. However, forecasts of summer expenditures are highly dependent on weather, which is unpredictable. [Hmmmm ... I did not know that. But we do know the exact temperature the earth will be 100 years from now.]
• The short-term outlook continues to see natural gas gaining in its share of electric power generation. With a warmer summer expected in 2018, EIA expects electric generation from June through August to top last year’s levels by more than 2%. Of total electrical generation over the summer, natural gas will account for 36%, 2% higher than last year, while coal’s share will drop by 2% to 30%.

Oil Markets:

• The short-term outlook continues to forecast that Brent crude oil spot prices will average $63 per barrel in both 2018 and 2019, while West Texas Intermediate will remain below $60 per barrel, averaging about $4 per barrel less than Brent in both years.
• EIA continues to forecast record crude oil production in the United States for both 2018 and 2019, largely as a result of horizontal drilling and hydraulic fracturing in tight rock formations, especially in the Permian region. 
• April’s short-term outlook expects U.S. production to average 10.7 million barrels per day in 2018, which would be a new record and represent an increase of nearly 15% from 2017 to 2018.

Natural Gas:

• U.S. dry natural gas production also remains on pace for record levels in both 2018 and 2019, according to the forecast. This year’s production is poised to increase by 7.5 billion cubic feet per day over 2017 levels to an average just above 81 billion cubic feet per day.
• The April short-term outlook maintains the forecast for U.S. natural gas net exports increasing to historic levels in both 2018 and 2019. 
• U.S. natural gas trade was almost balanced between exports and imports in 2017, but, in this forecast, EIA expects that the United States will see net natural gas exports climb above 4 billion cubic feet per day by 2019 as LNG terminals continue to come online. 

Coal:

• EIA’s April short-term outlook forecasts a 5% decline in coal production in 2018, following last year’s production increase. 
• Coal’s reduced share of electricity generation is largely behind the decline, but lower demand for U.S. coal exports is also a contributing factor. 

Renewables:

• EIA continues to forecast that electricity generation from wind will grow in 2018 and 2019. Assuming that precipitation and snowpack levels are consistent with forecasts, wind will—for the first time—overtake hydropower generation in 2019. 
• As greater capacity comes online, wind has the potential to become the nation’s largest renewable source.