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Fuels eIA N e w s 14 FEBRUARY 2014 | FUEL OIL NEWS | www.fueloilnews.com Global Crude Oil Prices Brent crude oil spot prices averaged between $108/bbl and $112/bbl for the sixth consecutive month in December 2013 at $111/bbl. EIA expects the Brent crude oil price to weaken as non-OPEC supply growth exceeds growth in world consump- tion. The Brent crude oil price is projected to average $105/bbl and $102/bbl in 2014 and 2015, respectively. The forecast WTI crude oil spot price, which fell from an average of $106/bbl during September to $94/bbl in November, increased to $98/bbl in December as a result of strong U.S. refinery runs. EIA expects that WTI crude oil prices will aver- age $93/bbl in 2014 and $90/bbl during 2015. The discount of WTI crude oil to Brent crude oil, which averaged $18/bbl in 2012 and then fell to below $4/bbl in July 2013, averaged $12/ bbl during the fourth quarter of 2013. EIA expects the discount of the WTI crude oil price to Brent to average $12/bbl in 2014, $3/bbl higher than projected in last month's STEO. This increase in the projected WTI dis- count reflects increasing uncertainty of the existing refinery infrastructure's ability to absorb growing production of light sweet crude oil in North America at current prices. Because of pipeline capacity expansions and pipeline reversals, there is now ample capacity to ship crude oil via pipeline from the previous bottleneck in the U.S. Midcontinent to the U.S. Gulf Coast. As a result, the Louisiana Light Sweet crude oil bench- mark on the Gulf Coast — which was priced at a premium to Brent for much of the last two years — has recently begun tracking WTI prices and selling at a discount to Brent. Thus, EIA expects the recent convergence of Gulf Coast crude oil prices with WTI to persist over the forecast period, with Gulf Coast crude oil prices moving in step with the WTI price plus a pipeline transport cost. At this price level, Gulf Coast crudes such as LLS and medium-grade Mars will trade at historically wide discounts to similar international benchmarks such as Brent and Dubai, respectively. EIA expects North American price discounts to continue into 2015 at levels similar to 2014 as new infrastructure comes online to meet additional produc- tion growth. Energy price forecasts are highly uncertain, and the current values of futures and options contracts suggest that prices could differ significantly from the forecast levels (Market Prices and Uncertainty Report). WTI futures contracts for April 2014 delivery traded during the five-day period ending January 2, 2014 averaged $98/bbl. Implied volatility aver- aged 16%, establishing the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in April 2014 at $86/bbl and $113/bbl, respectively. Last year at this time, WTI for April 2013 delivery averaged $93/bbl and implied volatility averaged 26%. The corresponding lower and upper limits of the 95% confidence interval were $74/bbl and $117/bbl. U.S. Petroleum Product Prices EIA expects that regular gasoline retail prices, which aver- aged $3.24/gal during November and $3.28/gal in December, will average $3.29/gal in January 2014. Led by falling Brent crude oil prices, the projected U.S. annual average regular gasoline retail price, which fell from $3.63/gal in 2012 to an average of $3.51/gal in 2013, will continue to fall to $3.46/gal in 2014 and $3.39 in 2015. Diesel fuel prices, which averaged $3.92/gal in 2013, are projected to average $3.81/gal in 2014 and $3.72/gal in 2015. U.S. Natural Gas Prices Cold weather in December had significant effects on demand, supply and prices across the country. Cold weather led to a net withdrawal of 285 billion cubic feet (Bcf) for the week ending Friday, December 13. This was the largest stor- age withdrawal since recordkeeping began in 1994. Another larger-than-normal storage withdrawal of 177 Bcf occurred the following week. Widespread freeze-offs occurred in December and disrupted production for several days in the Piceance Basin in Utah and Wyoming, the Uinta Basin in Utah, the San Joaquin Basin in California, and the Williston Basin in North Dakota. Imports from Canada helped miti- gate the loss of supply. During the month, prices rose across short-Term energy Outlook Release Date: January 7, 2014