EIA 2019–20 Winter Fuels Outlook...Oct 08, 2019 · Source: U.S. Energy Information...

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

EIA 2019–20 Winter Fuels Outlook

October 8, 2019

The main determinants of winter heating fuels expenditures are temperatures and prices• The latest winter weather outlook from the National Oceanic and

Atmospheric Administration (NOAA) indicates temperatures will be warmer than normal and warmer than last winter, with heating degree days forecast to be 1% below the 10-year (2009-2018) average and 4% below last winter.

• EIA’s price forecast is mixed this year, with propane and heating oil retail prices expected to be lower than last winter, natural gas retail prices higher than last winter, and electricity prices similar to last winter.

• The effect of warmer forecast temperatures contributes to lower expected fuel bills in most regions, with the exception of natural gas customers in the South and Midwest.

• Temperature outcomes tend to vary more than retail fuel prices during the winter, as changes in retail prices for electricity and natural gas tend to happen over longer periods of time.

Short-Term Energy and Winter Fuels Outlook October 8, 2019 2

Heating fuel market shares vary across U.S. regionsPrimary home heating fuel by state, 2017

3Short-Term Energy and Winter Fuels Outlook October 8, 2019

Source: U.S. Energy Information Administration based on 2017 American Community Survey

U.S. current population-weightedheating degree days

NOAA forecasts U.S. heating degree days this winter to be 4% lower than last winter and 1% lower than the 10-year average

4

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2019.

Short-Term Energy and Winter Fuels Outlook October 8, 2019

.Note: EIA calculations based on National Oceanic and Atmospheric Administration (NOAA) data. The gray box represents the 10-year average for October 2009–March 2019. Projections reflect NOAA's 14–16 month outlook.

0

1,000

2,000

3,000

4,000

total winter0

250

500

750

1,000

October November December January February March

2016/172017/182018/192019/20 forecast2009-2019 average

colder

warmer

EIA forecasts propane prices to drop below heating oil prices this winter on a heat-content basis

5

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

forecast

Winter (October–March)


0

10

20

30

40

2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

natural gasheating oilpropane


Actual expenditures compared with EIA’s October forecast are largely a function of weather outcomes

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U.S. Energy Information Administration, Winter Fuels Outlooks 2013 through 2018

Percentage change in expenditures and heating degree daysMarch end-of-winter STEO versus October STEO


-50%

-40%

-30%

-20%

-10%

0%

10%

20%

2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

HDDNatural GasElectricityHeating Oil

Fuel expenditures are generally expected to be lower this winter (October 1–March 31) compared with last winter, but propane is the only fuel below the five-year average



Note: * Propane expenditures are a volume-weighted average of the Northeast and Midwest regions. All other fuels are U.S. volume-weighted averages. Propane and heating oil prices do not reflect prices locked in before the winter heating season starts.

Fuel

Compared with previous five- winter average

Compared with last winter

Heating oil* 13% -4%Natural gas 5% -1%Propane * -6% -16%Electricity 4% -1%

Change in base case forecast fuel expenditures

Colder or warmer (+/- 10% HDD) than forecast winters can swing expected expenditures by as much as 25% compared with last winter


Note: * Propane expenditures are a volume-weighted average of the Northeast and Midwest regions. All other fuels are U.S. volume-weighted averages. Propane and heating oil prices do not reflect prices locked in before the winter heating season starts.


Fuel Base CaseIf 10% warmer than forecast

If 10% colder than forecast

Heating oil* -4% -14% 7%Natural gas -1% -9% 7%Propane * -16% -25% 4%Electricity -1% -7% 4%

Change in forecast fuel expenditures from last winter

Natural Gas


Winter 2019–20 takeaways – Natural gas

• As of September 27, inventories of natural gas in working storage were 16% higher than year-ago levels and close to the five-year average.

• Inventories are expected to end October at almost 3.8 trillion cubic feet, which would be 2% higher than the five-year average for this time of year.

• Dry natural gas production this winter is forecast to average close to 94 billion cubic feet/day, a 5% increase compared with last winter and up 31% from three winters ago.

• Henry Hub spot prices are forecast to average $2.56/million British thermal units this winter, a 24% decrease from last winter because of higher inventory levels.

• Very cold temperatures will likely contribute to spikes in spot prices; however, price spikes do not tend to be reflected immediately in retail prices, and record levels of natural gas production and high inventory levels might be reducing the need for inventory holding at the margin.

Short-Term Energy and Winter Fuels Outlook October 8, 2019 10

Natural gas heating expenditures are expected to increase in the South and Midwest and decline in the West and Northeast based on the current forecast, but temperatures will be a key variable

Change from last winter (forecast)

ConsumptionAverage

priceTotal

expenditures

-4% 3% -2%

0% 5% 4%

-6% 8% 1%

-3% -6% -9%21%

30%

23%

26%

Northeast

Midwest

South

West

Regional share of all U.S. households that use natural gas as their primary space heating fuel

11



EIA forecasts Henry Hub spot prices to average $2.56/MMBtu this winter

12

Note: Confidence interval and futures prices derived from market information for the five trading days ending October 3, 2019. Intervals not calculated for months with sparse trading in near-the-money options contracts.Source: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2019.

Henry Hub natural gas pricedollars per million Btu


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2014 2015 2016 2017 2018 2019 2020

95% NYMEX futures priceconfidence intervalupper bound

STEO forecastNYMEX futures price

95% NYMEX futures priceconfidence intervallower bound

Henry Hub spot price

EIA expects average residential natural gas prices to be slightly higher than prices last winterwinter average natural gas pricesdollars per thousand cubic feet (Mcf)

13

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2019, and Refinitiv.


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2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

Henry Hub spot priceU.S. average residential price

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forecast

10% warmer

In a 10% colder-than-forecast scenario, EIA expects natural gas inventories to end the winter within the five-year range

base case

10% colder

14

Note: Gray band represents the range between the minimum and maximum from 2014 to 2018.Source: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2019.

U.S. total end-of-month working natural gas inventoriestrillion cubic feet


U.S. natural gas production has covered an increasing share of winter consumption in recent years

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Source: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2019

Winter average U.S. dry natural gas productionas a percentage of consumption and exports


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100%

2011-2019 average

Winter 2019-20 forecast

Winter average Henry Hub spot pricedollars per million British thermal units

Henry Hub spot price

production percentage of consumption plus exports

1991-2011 average

Electricity generation now accounts for about 30% of total natural gas demand during winter months

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Source: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2019

Winter average natural gas consumptionbillion cubic feet per day


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10

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1990

-91

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-93

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-95

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-97

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-99

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-01

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-03

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-05

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-07

2008

-09

2010

-11

2012

-13

2014

-15

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2018

-19

Winter average natural gas consumptionpercent of total

0%

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90%

100%

1990

-91

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-93

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-01

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-11

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electric

other

res/com

Heating Oil


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Winter 2019–20 takeaways – Heating oil

• EIA expects Brent crude oil spot prices to average $59 per barrel (b) this winter, $7/b (17 cents/gal) less than last winter; however, the outlook for crude oil supply disruptions and economic growth add uncertainty to the forecast for the winter.

• EIA expects International Maritime Organization 2020 regulations that reduce the amount of sulfur allowable in global bunker fuel to increase refining margins for distillate fuels, including heating oil, this winter.

• Lower forecast crude oil prices offset higher refining margins and contribute to lower expected retail heating oil prices this winter.

• Distillate stocks in the Northeast totaled 28.8 million barrels on September 27, 2.1 million barrels (7%) lower than the same time last year and 26% lower than the previous five-year average.

• EIA expects ample distillate supplies to be available to meet demand, but localized supply issues are possible if severely cold temperatures in the Northeast coincide with severely cold temperatures in Europe.


EIA expects average residential heating oil prices to be 2% lower than prices last winter, averaging $3.02 per gallonmonthly average heating oil and Brent crude oil pricesdollars per gallon

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Source: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2019, and Refinitiv.

0.00

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Jan 2015 Jan 2016 Jan 2017 Jan 2018 Jan 2019 Jan 2020

winter

residential heating oil price

Brent crude oil spot price

forecast


Northeast distillate fuel inventories are below the five-year average and recently dipped below year-ago levels

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Source: U.S. Energy Information Administration, Weekly Petroleum Status Report

Northeast distillate fuel inventoriesmillion barrels


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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2014-18 inventory range

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2019

2017

5-yr avg

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Jan 2017 Jan 2018 Jan 2019 Jan 2020

forecast

10% warmer

Distillate inventories are near the lowest level in the past five years, but seasonality has become more muted in recent years

base case 10% colder

21

Note: Gray band represents the range between the minimum and maximum from 2014 to 2018.Source: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2019.

U.S. total end-of-month distillate inventoriesmillion barrels


Propane


Winter 2019–20 takeaways – Propane

23

• U.S. propane/propylene inventories as of September 27 were 100.6 million barrels, which was 15% higher than the previous five-year average for that time of year and 26% above year-ago levels.

• In all regions except for the Midwest, which is the region most reliant on propane for heating, inventories are going into the winter on the high side of the 5-year range. In the Midwest inventories as of September 27, were about the same as last year and the five-year average.

• Rising propane supply combined with lower consumption during much of 2019 has contributed to rising inventories and falling prices.

• EIA forecasts propane production to be 12% higher this winter compared with last winter, while total propane consumption is expected to be up 2% from last winter, and net exports are forecast to rise by 32%, supported by rising production and high inventory levels.

• EIA expects propane retail prices in the Northeast and Midwest to be 10% and 12% lower, respectively.


EIA forecasts propane expenditures to down from last year’s levels because of lower consumption and prices


ConsumptionAverage

priceTotal

expenditures

n/a n/a n/a

n/a n/a n/a

-6% -12% -17%

-3% -10% -12%17%

37%

31%

16%

Northeast

Midwest

South

West

Regional share of all U.S. households that use propane as primary space heating fuel


Note: n/a = not available because of insufficient underlying data to create forecastSource: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2019.

Propane inventories in the Midwest were at the five-year average as of September 27

25

Source: U.S. Energy Information Administration, Weekly Petroleum Status Report

Midwest propane/propylene inventoriesmillion barrels


0

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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2018

2019

2017

5-yr avg

2014-18 inventory range

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120

Jan 2017 Jan 2018 Jan 2019 Jan 2020

forecast

10% warmer

U.S. propane inventories are starting the winter near the top of the five-year range

base case10% colder

26

Note: Propane inventories include refinery propylene. Gray band represents the range between the minimum and maximum from 2014 to 2018.Source: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2019.

U.S. total end-of-month propane inventoriesmillion barrels


Electricity


Winter 2019–20 takeaways – Electricity

28

• Because wholesale electricity prices are slow to pass through to consumers, yearly increases in expenditure deviations are driven more by temperatures.

• Electricity consumption is expected to be 1% lower this winter compared with last winter because of a forecast of warmer temperatures than last winter.

• EIA expects residential electricity prices to be the same this winter compared with last winter.

• In the case of very cold temperatures, Northeast electricity markets could see constrained natural gas supplies into the region causing electricity generation to be supplied by more expensive fuels, such as petroleum, which could contribute to higher wholesale electricity prices.


Winter electricity bills are expected to be higher compared with last winter, but temperatures will be a key variable


ConsumptionAverage

priceTotal

expenditures

-3% 2% -1%

0% 0% 0%

-4% 2% -3%

-2% -1% -3%7%

13%

61%

19%

Northeast

Midwest

South

West

Regional share of all U.S. households that use electricity as primary space heating fuel

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30

Annual growth in residential electricity prices averaged 1.2% over the past five winters



U.S. winter average residential electricity pricecents per kilowatthour

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2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

average residential price (left axis)annual change (right axis)

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EIA’s winter Heating Fuels Webpage provides more detailed information on winter fuel supply and prices

www.eia.gov/special/heatingfuels

• Availability and pricing for the four principals heating fuels

• Propane• Heating oil• Natural gas• Electricity

• Data for each state are available on the clickable map

• Links to resources for each state

• Current week and three-month weather forecasts from NOAA

• Downloadable graphs as an image or as a spreadsheet


http://www.eia.gov/special/heatingfuels

EIA 2019–20 Winter Fuels Outlook...Oct 08, 2019 · Source: U.S. Energy Information...

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