Price expectations stay the same in EIA’s short-term outlook
Heating cost across the United States are likely to be lower this winter than they have been for the last two years, according to the Energy Information Administration’s (EIA) Short-Term Energy Outlook (STEO) for October. The average U.S. household expenditures for natural gas, heating oil and propane from October 1 to March 31 will be 10%, 25% and 18% lower, respectively, than last winter due to lower fuel prices and lower heating demand. Residential electricity prices are expected to be just 3% lower than last year.
While the EIA anticipates that demand will be down for heating fuels this winter, the agency’s forecast price for both Brent and WTI remained unchanged from September’s STEO, with the energy agency expecting European benchmark Brent to average $54/bbl in 2015 and $59/bbl in 2016, while U.S. benchmark WTI is expected to average $50/bbl for 2015 and $54/bbl for 2016.
U.S. regular gasoline monthly retail prices averaged $2.37/gallon in September, a decrease of $0.27/gal from August and $1.04/gal lower than in September 2014. The EIA expects monthly gasoline prices to decline to an average of $2.03/gal in December 2015, and average $2.38/gal in 2016.
Total U.S. crude oil production declined by 120 MBOPD in September compared to August, according to the EIA’s data. The agency expects U.S. crude oil production to average 9.2 MMBOPD for 2015. Production is forecast to decrease through mid-2016, averaging 8.9 MMBOPD for 2016.
Heating costs down, even if weather turns colder
Weather forecasters expect winter temperatures east of the Rocky Mountains to be warmer than last winter, with projected heating degree days in the Northeast, Midwest, and South respectively about 13%, 11%, and 8% lower, according to the EIA; in the West, this winter is expected to be 12% colder than last winter. The EIA predicts that even if temperatures are 10% colder than currently forecast by the National Oceanic and Atmospheric Administration (NOAA), the cost for heating fuels will still be 16%, 4%, and 3% lower for heating oil, natural gas and propane, respectively, while electricity will remain unchanged from last year’s price.
Based on the EIA’s Winter Fuels Outlook, average household expenditures for homes heating primarily with natural gas will total $578 this winter; homes primarily using propane are expected to spend $1,437, while those using heating oil and electric hear are expected to spend $1,392 and $930, respectively.
Contributing to the lower cost of natural gas, inventories in working storage were 15% above year-ago levels as of September 25. The EIA expects natural gas production to average 75.2 Bcf/d, 2% higher than last year, with a projected Henry Hub spot price this winter averaging $2.92/MMBtu, compared to $3.35/MMBtu last winter.
Localized spikes in prices could still occur in the Northeast, according to the EIA. New England is still especially susceptible to high prices due to transportation constraints.
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