On April 2, Iran and the five permanent members of the United Nations Security Council plus Germany (P5+1) reached a framework agreement that could result in the lifting of oil-related sanctions against Iran. Lifting sanctions could substantially change the STEO forecast for oil supply, demand, and prices by allowing a
significantly increased volume of Iranian barrels to enter the market. If and when sanctions are lifted, the baseline forecast for world crude oil prices in 2016 could be reduced $5-$15/barrel (bbl) from the level presented in this STEO.
Iran is believed to hold at least 30 million barrels in storage, and EIA believes Iran has the technical capability to ramp up crude oil production by at least 700,000 bbl/day (bbl/d) by the end of 2016. The pace and magnitude at which those volumes would reach the market would depend on the terms of a final agreement. For additional analysis of the possible oil market effects of a lifting of sanctions against Iran, please see analysis box for further discussion.
North Sea Brent crude oil prices averaged $56/bbl in March, a decrease of $2/bbl from the February average. EIA forecasts that Brent crude oil prices will average $59/bbl in 2015 and $75/bbl in 2016, both unchanged from last month's STEO. West Texas Intermediate (WTI) prices in 2015 and 2016 are expected to average $7/bbl and $5/bbl below Brent, respectively. The current values of futures and options contracts continue to suggest very high uncertainty in the oil price outlook (Market Prices and Uncertainty Report). Although WTI futures contracts for the broadly held December 2015 delivery traded during the five-day period ending April 2 averaged $52/bbl , the market's expectations (at the 95% confidence interval) for monthly average WTI prices in that month ranges from $32/bbl to $97/bbl.
During the 2015 April-through-September summer driving season, regular gasoline retail prices are forecast to average $2.45/gallon (gal) compared with $3.59/gal last summer (see EIA Summer Fuels Outlook slideshow). Based on EIA's gasoline price forecast, the average U.S. household is expected to spend about $700 less on gasoline in 2015 compared with 2014, as annual motor fuel expenditures are on track to fall to their lowest level in 11 years.
Natural gas working inventories were 1,461 billion cubic feet (Bcf) on March 27, which was 75% higher than a year earlier, but 12% lower than the previous five-year (2010-14) average. The winter withdrawal season typically ends in March, and April is typically the beginning of the injection season, which runs through October. EIA projects natural gas inventories will end October 2015 at 3,781 Bcf, a net injection of 2,310 Bcf. This would be the fourth-highest injection season on record, but it would be 420 Bcf lower than last year's net April-October injection.
Power generators are using more natural gas than last year, primarily because of lower natural gas prices compared with coal prices. The use of natural-gas-fired generation is projected to average 30.4% of total generation in 2015 compared with 27.4% during 2014. U.S. coal production is expected to fall by 7.1% in 2015, as natural gas displaces coal for power generation.
Source: EIA