EIA: Short-Term Energy and Winter Fuels Outlook

Forecast Highlights

EIA projects average U.S. household expenditures for natural gas, heating oil, electricity, and propane will increase this winter (October 1 through March 31) compared with last winter. Based on projections from the National Oceanic and Atmospheric Administration (NOAA), forecast temperatures this winter, measured using heating degree days, are 3% warmer than the previous 10-year average but colder than last winter, which was 15% warmer than the 10-year average nationally.

Forecast average household expenditures for heating oil, propane, and natural gas are 38%, 26%, and 22% higher than last winter, respectively, because of higher expected heating demand and higher fuel prices. However, expenditures for heating oil and propane this winter are forecast to be 32% and 18% lower, respectively, than in average of the five winters prior to last winter. Natural gas expenditures this winter are forecast to be similar to expenditures in the five winters prior to last year. Higher forecast heating demand contributes to electricity expenditures that are 5% higher than last winter, despite largely unchanged prices (for further discussion see the Winter Fuels Outlook supplement).

U.S. crude oil production averaged 9.4 million barrels per day (b/d) in 2015, and it is forecast to average 8.7 million b/d in 2016 and 8.6 million b/d in 2017. Forecast production in 2017 is almost 0.1 million b/d higher than in the previous forecast.

Brent crude oil prices are forecast to average $43/barrel (b) in 2016 and $51/b in 2017, $1/b higher and $1/b lower than forecast in last month’s STEO, respectively. West Texas Intermediate (WTI) crude oil prices are forecast to average about $1/b less than Brent in 2016 and in 2017. The current values of futures and options contracts suggest high uncertainty in the price outlook. NYMEX contract values for January 2017 delivery traded during the five-day period ending October 6 suggest a price range from $37/b to $68/b encompasses the market expectation of WTI prices in January 2017.

Isolated refinery outages and a disruption to the Colonial Pipeline system contributed to U.S. average retail regular gasoline prices in September increasing by 4 cents/gallon (gal) from August to an average of $2.22/gal. With a return to normal refinery and pipeline operations, the switch to less-expensive winter gasoline blends, and the typical seasonal decline in gasoline consumption, EIA expects gasoline prices to fall an average of $1.97/gal in January. Retail gasoline prices are forecast to average $2.12/gal in 2016 and $2.26/gal in 2017.

Global oil inventory builds are forecast to average 0.7 million b/d in 2016 and 0.3 million b/d in 2017.

Natural gas marketed production fell from 79.7 billion cubic feet per day (Bcf/d) in September 2015 to 76.5 Bcf/d in July 2016. EIA expects marketed natural gas production to average 77.5 Bcf/d in 2016, a decrease of 1.6% from the 2015 level, which would be the first annual decline since 2005. Forecast production increases by 3.7 Bcf/d in 2017.

Henry Hub spot prices are forecast to average $3.04/million British thermal units (MMBtu) in the fourth quarter of 2016 and $3.07/MMBtu in 2017. Natural gas futures contracts for January 2017 delivery traded during the five-day period ending October 6 averaged $3.34/MMBtu. NYMEX contract values for January 2017 delivery traded during the five-day period ending October 6 suggest a price range from $2.28/MMBtu to $4.88/MMBtu encompasses the market expectation of Henry Hub natural gas prices in January 2017.

EIA expects the share of U.S. total utility-scale electricity generation from natural gas will average 35% this year, and the share from coal will average 30%. Last year, both fuels supplied about 33% of total U.S. electricity generation. In 2017, natural gas and coal are forecast to generate about 34% and 31% of electricity, respectively, as natural gas prices are forecast to increase. Nonhydropower renewables are forecast to generate 8% of electricity generation in 2016 and 9% in 2017. Generation shares of nuclear and hydropower are forecast to be relatively unchanged from 2016 to 2017.

Coal exports in July 2016 totaled 3.3 million short tons (MMst), which was 40% lower than in June and the lowest amount of coal exported in any month since February 2007. Exports for the first seven months of 2016 were 32% lower than in the same period in 2015. EIA forecasts U.S. coal exports will decline by 26% in 2016 to 55 MMst, the lowest level since 2006. Exports are expected to decline by an additional 5% in 2017.

Although starting from a relatively low base, utility-scale solar generating capacity increases from 10 gigawatts (GW) at the end of 2014 to 27 GW in 2017, which is an average annual growth rate of 39%, the highest growth rate among sources of renewable electricity generation.

After declining by 2.8% in 2015, energy-related carbon dioxide emissions in the first six months of 2016 were the lowest for that period since 1991. For all of 2016, emissions are projected to decline by 1.4%, and then increase by 0.6% in 2017. Energy-related CO2 emissions are sensitive to changes in weather, economic growth, and energy prices.