This edition of the Short-Term Energy Outlook is the first to include forecasts for 2018.

Benchmark North Sea Brent crude oil spot prices averaged $53/barrel (b) in December, a $9/b increase from November. This was the first month since July 2015 in which Brent spot prices averaged more than $50/b.

Brent crude oil prices are forecast to average $53/b in 2017 and $56/b in 2018. West Texas Intermediate (WTI) crude oil prices are forecast to average $1/b less than Brent in both 2017 and 2018. The current values of futures and options contracts suggest high uncertainty in the price outlook. For example, EIA’s forecast for the average WTI price in December 2017 of $53/b should be considered in the context of NYMEX contract values for December 2017 delivery. Contracts traded during the five-day period ending January 5 suggest the market expects WTI prices could range from $35/b to $93/b (at the 95% confidence interval) in December 2017.

U.S. regular gasoline retail prices are expected to increase from an average of $2.25/gallon (gal) in December to $2.31/gal in the first quarter of 2017. U.S. regular gasoline retail prices are forecast to average $2.38/gal in 2017 and $2.41/gal in 2018.

U.S. crude oil production averaged an estimated 8.9 million barrels per day (b/d) in 2016 and is forecast to average 9.0 million b/d in 2017 and 9.3 million b/d in 2018. The forecast increases in production largely reflect increases in federal offshore Gulf of Mexico production. Rising tight oil production, which results from increases in drilling activity, rig efficiency, and well-level productivity, also contributes to forecast U.S. production growth.

Dry natural gas production is estimated to have averaged 72.4 billion cubic feet per day (Bcf/d) in 2016, a decline of 1.8 Bcf/d (2.4%) from 2015, which would be the first time annual average natural gas production has fallen since 2005. Forecast dry natural gas production increases by an average of 1.4 Bcf/d in 2017 and by 2.8 Bcf/d in 2018.

The Henry Hub natural gas spot price averaged $2.51/million British thermal units (MMBtu) in 2016 and is expected to increase to an average of $3.55/MMBtu in 2017 and $3.73/MMBtu in 2018. Higher average prices in 2017 reflect price increases in the second half of 2016 because of a hot summer and declining production, which reduced the inventory excess compared with the previous five-year average.

EIA estimates the annual average share of U.S. total utility-scale electricity generation from natural gas was 34% in 2016 and the share from coal was 30%, marking the first time that a fuel other than coal provided the largest share of electricity generation on an annual basis. The generation shares of coal and natural gas are expected to be roughly equal in 2017, as both fuels are projected to generate about 32% of electricity. In 2018, natural gas and coal generate 33% and 32% of electricity, respectively.

The forecast shares of electricity generation fuels from other energy sources are expected to change modestly. Nuclear power is estimated to have generated 20% of electricity in 2016 and is projected to fall slightly to 19% of generation in 2018. Nonhydropower renewables are estimated to have generated 8% of electricity in 2016 and to grow to 9% of generation in 2018. Hydropower’s share of electricity generation from 2016 through 2018 is expected to remain between 6% and 7%.