EIA Short-Term Energy and Winter Fuels OutlookWinter Fuels Outlook

EIA Short-Term Energy and Winter Fuels OutlookWinter Fuels Outlook

O b 8 2013 | W hi DCOctober 8, 2013 | Washington, DC

www.eia.govU.S. Energy Information Administration Independent Statistics & Analysis

OverviewWi t F l O tl k f h h ld• Winter Fuels Outlook focuses on households.

• EIA expects higher prices this winter for homes that heat with natural gas propane and electricity Home heating oil pricesnatural gas, propane, and electricity. Home heating oil prices are expected to be lower than last winter.

• Forecast temperatures are close to last winter with the N th t b t 3% ld d th W t 3%Northeast about 3% colder and the West 3% warmer.

• Projected changes in residential expenditures from last winter are:are:– 13% higher for homes that heat primarily with natural gas– 9% higher for propane– 2% higher for electricity; 2% lower for heating oil

• Although natural gas expenditures are significantly higher than last winter, they are still lower than the average of the previous five winters (October 2007 – March 2012)five winters (October 2007 March 2012).

2Short-Term Energy and Winter Fuels OutlookOctober 8, 2013

Expenditures are expected to be higher this winter (October 1– March 31) for natural gas propane(October 1 March 31) for natural gas, propane, electricity; lower for heating oil

Percent change in fuel bills from last winter (forecast)g ( )

Fuel billBase case

forecastIf 10% warmer than forecast

If 10% colder than forecast

Heating oilHeating oil -2 -13 9

Natural gas 13 3 25

Propane * 9 - -

Electricity 2 -1 6

* Propane expenditures are a volume-weighted average of the Northeast and Midwest regions. All others are U.S. volume-weighted averages. Propane prices do not reflect prices locked in before the winter heating season starts. Propane prices are not available for the warm and cold cases.


Source: EIA Short-Term Energy Outlook, October 2013

Heating fuel market shares vary regionallyShare of homes by primary space heating fuel and Census Region

NortheastMidwest

West natural gas

propaneheating oilelectricity

South U.S. total

propanewoodkerosene/other/no heating

116 million homes


Source: U.S. Census Bureau, 2012 American Community Survey

Although forecast natural gas expenditures are significantly higher they are still lower than the previous 5 year averagehigher, they are still lower than the previous 5-year average

compared with last winter

% change in fuel expenditures

15%

20%

25%compared with last winter

compared with the previous 5-winter average (October 2007 - March 2012)

5%

10%

-10%

-5%

0%

natural gas electricity heating oil propane

Note: All prices are U.S. averages except propane, which is an average of Northeast and Midwest prices.

5


Short-Term Energy and Winter Fuels OutlookOctober 8, 2013

The differences between natural gas, heating oil, and propane prices narrow this winter, with natural gas price 14% higher, heating oil price down 5%, and propane price up 9%

U.S. average residential winter heating fuel pricesdollars per million Btu

30

40

Natural gas Heating oil Propane

dollars per million BtuForecastHistory

20

30

10

02007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Winter (October - March)



The U.S. winter 2013-14 heating season forecast is very close to last winter and the 10-year average

U.S. current population-weightedheating degree days

1,000

close to last winter and the 10 year average

600700800900

,

300400500600

0100200

Oct Nov Dec Jan Feb MarOct Nov Dec Jan Feb Mar

2010-2011 2011-2012 2012-2013 2013-2014 Forecast

Note: Source: EIA calculations based on National Oceanic and Atmospheric Administration (NOAA) data. Horizontal lines indicate 10-year average over the period Oct 2003 – Mar 2013. Projections reflect NOAA's 14-16 month outlook.



Natural Gas


Higher natural gas prices raise average fuel bills in all regions this winter

Percent change from last winter (forecast)

Average Total

Regional share of all U.S. households that use natural

gas as primary space

ConsumptionAverage

priceTotal

expenditures

-2 10 726%West

heating fuel

0 13 13

-1 14 1331%

23%

Midwest

South

3 15 1820%Northeast



Natural gas pipeline constraints into New England may produce periods of localized higher wholesale pricingproduce periods of localized higher wholesale pricing

Natural gas fueled less than 30% of the electricityNatural gas fueled less than 30% of the electricity generated in New England in 2001, but that figure rose to 52% in 2012.

Increased gas use for power generation has contributed toIncreased gas use for power generation has contributed to pipeline transportation constraints in the New England regional natural gas market.

These pipeline constraints are more pronounced in winterThese pipeline constraints are more pronounced in winter months and contributed to extreme price spikes in spot natural gas and electricity prices in New England during January and February 2013.

EIA’s Market Alerts are published on eia.gov during periods of stress caused by cold snaps in the winter or heat waves in


f y pthe summer.

EIA expects residential natural gas prices to be higher than last winter’s pricesthan last winter s prices

F tHi tDollars per thousand cubic feet (mcf)

16

18

20Winter

Residential price

ForecastHistory

8

10

12

14

2

4

6

8

Henry Hub spot price0

2

Jan 2009 Jan 2010 Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015

Henry Hub spot price



Future natural gas prices remain highly uncertain

8Henry Hub spot price

Dollars per million BtuHistory Forecast

6

7 STEO price forecastNYMEX Henry Hub futures price68% NYMEX confidence interval95% NYMEX fid i t l

4

5 95% NYMEX confidence interval

2

3

0

1

Jan 2012 Jul 2012 Jan 2013 Jul 2013 Jan 2014 Jul 2014

12

Source: EIA Short-Term Energy Outlook, October 2013, and CME Group

Short-Term Energy and Winter Fuels OutlookOctober 8, 2013

The probability of the January 2014 Henry Hub natural gas price being higher than $4.50 per MMBtu is about 11%p g g p

50%

probability of exceedance

35%40%

50%Nymex Henry Hub natural gas futures price for delivery during January 2014 = $3.83 per million Btu

20%

30%

11%

2%10%

0%> $4.00 / MMBtu > $4.50 / MMBtu > $5.00 / MMBtu

Source: EIA Short-Term Energy Outlook, October 2013, and CME Group (Nymex closing prices for 5 trading days


ending Oct. 3, 2013)

Forecast natural gas inventories start this winter about 100 bcflower than last winter, but 70 bcf above the previous 5-year average

4 0004,500billion cubic feet Forecast

10% warmer

History

2 5003,0003,5004,000

1,5002,0002,500

10% colder

0500

1,000

J 2011 J 2012 J 2013 J 2014 J 2015

Base case

Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015

Note: Normal range (gray band) represents the range between the minimum to maximum from Jan. 2008 to Dec. 2012.



Heating Oil


EIA expects residential heating oil prices to average 5% lower this winter than last

5

dollars per gallon

4

Winter Home heating oil retail price

Forecast

2

3

1Brent crude oil spot price

0Jan 2009 Jan 2010 Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015

Home heating oil retail price includes taxes.



Going into winter, distillate inventories remain at the low end of their normal rangeg

200million barrels ForecastHistory

120140160180 Base case10% warmer

6080

100120

10% colder

0204060

2011 2012 2013 2014 2015




New York, which represents almost 1/3 of the Northeast heating oil market, now requires ultra-low sulfur fuelheating oil market, now requires ultra low sulfur fuel

15 ppm

15 ppm

Note: Specifications change on July 1 of the years shown, with the exception of Maine's requirements, which change on January 1.* Connecticut’s requirements will only go into effect after New York, Massachusetts, and Rhode Island have implemented similar requirements. Rhode Island has not finalized a sulfur requirement.


Source: U.S. Energy Information Administration.

Electricity


Winter electricity bill forecasts are slightly higher than last winter


ConsumptionAverage

priceTotal

expenditures

Regional share of all U.S. households that use

electricity as primary space f Consumption price expenditures

-1 3 219%West

heating fuel

0 2 2

-1 2 212%

62%

Midwest

South

1 3 47%Northeast



Propane


Forecast propane expenditures also higher than last i b f hi h iwinter because of higher prices


Average Total

Regional share of all U.S. households that use

propane as primary spaceConsumption

Average price

Total expenditures

- - -16%West

propane as primary space heating fuel

- - -

-1 10 936%

34%

Midwest

South

3 7 1114%Northeast



Propane inventories remain near the middle of their historical range during the upcoming winterhistorical range during the upcoming winter

80million barrels Forecast History

506070

10% warmer

304050

10% colder

History

01020

Base case

10% colder

02011 2012 2013 2014 2015




For more informationFor more informationU.S. Energy Information Administration home page | www.eia.gov

Short-Term Energy Outlook | www.eia.gov/steo

Annual Energy Outlook | www.eia.gov/aeo

International Energy Outlook | www.eia.gov/ieo

Monthly Energy Review | www eia gov/merMonthly Energy Review | www.eia.gov/mer

State Energy Portal | http://www.eia.gov/state


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EIA Short-Term Energy and Winter Fuels OutlookWinter Fuels Outlook