U.S. Energy Information Administration | Winter Fuels Outlook October 2016 1 October 2016 Winter Fuels Outlook For the purposes of this outlook, EIA considers the winter season to run from October through March. The average household winter heating fuel expenditures discussed in this supplement are a broad guide to changes compared with recent winters. Fuel expenditures for individual households are highly dependent on the size and energy efficiency of individual homes and their heating equipment, along with thermostat settings, local weather conditions, and market size (see Winter Fuels Outlook table). Temperatures this winter, based on the most recent forecast of heating degree days (from the National Oceanic and Atmospheric Administration (NOAA), are expected to be much colder than last winter east of the Rocky Mountains, with the Northeast and Midwest 17% colder and the South 18% colder. Despite the expectation of colder temperatures compared with last winter, temperatures in the eastern United States are expected to be about 3% warmer than the average of the five winters preceding last winter, as temperatures last winter were much warmer than normal in those areas. In the West, temperatures are forecast to be about 2% warmer than last winter. However, recent winters provide a reminder that weather can be unpredictable. In addition to the base case, the Winter Fuels Outlook includes forecasts for scenarios where heating degree days in all regions may be 10% higher (colder) or 10% lower (warmer) than forecast. Natural Gas. Nearly half of all U.S. households heat primarily with natural gas. EIA expects households heating primarily with natural gas to spend $116 (22%) more this winter compared with last winter. However, forecast average expenditures of households heating with natural gas this winter will be comparable to those in the five winters prior to last winter. The increase in forecast expenditures compared with last winter is driven by comparatively similar increases in price and consumption. Residential natural gas prices are forecast to average $10.37 per thousand cubic feet (Mcf), 11% higher than last winter. Prices at this level would be the highest since the winter of 2010-11. Consumption is forecast to be 10% higher than last winter. The increase in consumption is based on a return to temperatures that are closer to normal following last winter’s El Niño weather pattern that resulted in winter temperatures that were 15% warmer than the previous ten-year average nationally. Although forecast residential natural gas prices are 11% higher than prices last winter, Henry Hub spot prices are expected to average $3.16 per million British thermal units (MMBtu) ($3.26/Mcf), which would be 53% higher than last winter. Higher natural gas prices reflect falling natural gas production during 2016 and increased use of natural gas for electricity generation. Changes in spot prices do not quickly translate into changes in delivered residential prices. The
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U.S. Energy Information Administration | Winter Fuels Outlook October 2016 1
October 2016
Winter Fuels Outlook
For the purposes of this outlook, EIA considers the winter season to run from October through
March. The average household winter heating fuel expenditures discussed in this supplement
are a broad guide to changes compared with recent winters. Fuel expenditures for individual
households are highly dependent on the size and energy efficiency of individual homes and their
heating equipment, along with thermostat settings, local weather conditions, and market size
(see Winter Fuels Outlook table).
Temperatures this winter, based on the most recent forecast of heating degree days (from the
National Oceanic and Atmospheric Administration (NOAA), are expected to be much colder than
last winter east of the Rocky Mountains, with the Northeast and Midwest 17% colder and the
South 18% colder. Despite the expectation of colder temperatures compared with last winter,
temperatures in the eastern United States are expected to be about 3% warmer than the
average of the five winters preceding last winter, as temperatures last winter were much
warmer than normal in those areas. In the West, temperatures are forecast to be about 2%
warmer than last winter. However, recent winters provide a reminder that weather can be
unpredictable. In addition to the base case, the Winter Fuels Outlook includes forecasts for
scenarios where heating degree days in all regions may be 10% higher (colder) or 10% lower
(warmer) than forecast.
Natural Gas. Nearly half of all U.S. households heat primarily with natural gas. EIA expects
households heating primarily with natural gas to spend $116 (22%) more this winter compared
with last winter. However, forecast average expenditures of households heating with natural gas
this winter will be comparable to those in the five winters prior to last winter.
The increase in forecast expenditures compared with last winter is driven by comparatively
similar increases in price and consumption. Residential natural gas prices are forecast to average
$10.37 per thousand cubic feet (Mcf), 11% higher than last winter. Prices at this level would be
the highest since the winter of 2010-11. Consumption is forecast to be 10% higher than last
winter. The increase in consumption is based on a return to temperatures that are closer to
normal following last winter’s El Niño weather pattern that resulted in winter temperatures that
were 15% warmer than the previous ten-year average nationally.
Although forecast residential natural gas prices are 11% higher than prices last winter, Henry
Hub spot prices are expected to average $3.16 per million British thermal units (MMBtu)
($3.26/Mcf), which would be 53% higher than last winter. Higher natural gas prices reflect falling
natural gas production during 2016 and increased use of natural gas for electricity generation.
Changes in spot prices do not quickly translate into changes in delivered residential prices. The
Note: Winter covers the period October 1 through March 31. Fuel prices are nominal prices. Fuel consumption per household is based only on households that use that fuel as the primary space-heating fuel. Included in fuel consumption is consumption for water heating, appliances, and lighting (electricity). Per-household consumption based on an average of EIA 2005 and 2009 Residential Energy Consumption Surveys corrected for actual and projected heating degree days. Number of households using heating oil includes kerosene.
www.eia.govU.S. Energy Information Administration Independent Statistics & Analysis
EIA Winter Fuels Outlook
October 13, 2016
Overview• Although overall expenditures are expected to be higher than last year, they
are comparable to or lower than the average winters from 2010-11 through 2014-15, except for electricity, where expenditures are higher in both cases
• EIA expects heating fuel prices for homes that heat with natural gas, propane, and heating oil to be higher than prices last winter; forecast residential electricity prices are about the same as last winter
• The latest outlook from NOAA expects winter temperatures east of the Rocky Mountains to be colder than last winter, with projected heating degree days in the Northeast, Midwest, and South about 16-18% higher. In the West, this winter is expected to be similar to last winter. This winter’s forecast is a return to close to normal temperatures
2Short-Term Energy and Winter Fuels Outlook October 13, 2016
Expenditures are expected to be higher this winter (October 1–March 31) compared with last winter, but close to or lower than average expenditures for winters prior to last winter
3Short-Term Energy and Winter Fuels Outlook October 13, 2016
.Source: EIA Short-Term Energy Outlook, October 2016.
Note: * 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
FuelCompared to average
winters 2010-14 Compared to last winterHeating Oil -32 38Natural Gas 0 22Propane * -18 27Electricity 5 2
Percent change in expenditures
EIA forecasts scenarios if temperatures are 10% warmer and 10% colder than the base case
Percent change in fuel bills from last winter (forecast)
Fuel billBase case
forecastIf 10% warmer than
forecast If 10% colder than
forecast
Heating oil 38 23 56
Natural gas 22 12 31
Propane * 26 6 49
Electricity 5 2 9
4
.Source: EIA Short-Term Energy Outlook, October 2016.
Short-Term Energy and Winter Fuels Outlook October 13, 2016
Note: * 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
Heating fuel market shares vary across U.S. regions
5
Share of homes by primary space-heating fuel and Census Region
Northeast
South
Midwest
West
U.S. total118 million homes
natural gas
propaneheating oil/keroseneelectricity
woodother/no heating
Source: U.S. Energy Information Administration based on 2015 American Community Survey
Short-Term Energy and Winter Fuels Outlook October 13, 2016
Prices for all fuels are forecast to be higher than last winter, but heating oil and propane prices are expected to remain below levels from 2010-14 when crude oil prices were higher
6
U.S. average residential winter heating fuel pricesdollars per million Btu
forecast
Winter (October - March)
Source: EIA Short-Term Energy Outlook, October 2016.
Short-Term Energy and Winter Fuels Outlook October 13, 2016
U.S. current population-weightedheating degree days
0100200300400500600700800900
1,0001,100
Oct Nov Dec Jan Feb Mar
2013-2014 2014-2015 2015-2016 2016-2017 Forecast
10-year average
NOAA forecasts U.S. heating degree days this winter to be 13% higher than last winter, but below the 10-year average
7
Note: EIA calculations based on National Oceanic and Atmospheric Administration (NOAA) data. Horizontal lines indicate 10-year average over the period Oct. 2006 – Mar. 2016. Projections reflect NOAA's 14-16 month outlook.Source: EIA Short-Term Energy Outlook, October 2016.
Short-Term Energy and Winter Fuels Outlook October 13, 2016
Natural Gas
8Short-Term Energy and Winter Fuels Outlook October 13, 2016
Winter 2016-17 takeaways – Natural gas
9
• As of September 30, inventories of natural gas in working storage were 2% above year-ago levels, and are expected to end October at near-record levels
• Dry natural gas production this winter is projected to average 75.2 Bcf/day, an increase of 1.7 Bcf/day (2%) compared with last winter
• Henry Hub prices were below $3 per million Btu (MMBtu) during the last winter. However, this year lower production and increased demand contribute to the projected Henry Hub spot price averaging $3.15/MMBtu this winter compared with $2.06/MMBtu last winter
• Ongoing transportation constraints for delivering natural gas to Northeast consumers, especially in New England, could contribute to localized price volatility during periods of very cold temperatures
Short-Term Energy and Winter Fuels Outlook October 13, 2016
Natural gas heating expenditures are expected to increase significantly across in the eastern half of the country, but they are similar to levels from winters 2010-11 through 2014-15
percent change from last winter (forecast)
consumptionaverage
pricetotal
expenditures
-1 6 5
13 9 23
13 14 30
14 13 2920%
30%
24%
26%
Northeast
Midwest
South
West
regional share of all U.S. households that use natural gas as primary space heating fuel
10
Source: EIA Short-Term Energy Outlook, October 2016.
Short-Term Energy and Winter Fuels Outlook October 13, 2016
EIA expects average residential natural gas prices to be 11% above prices last wintermonthly average natural gas pricesdollars per thousand cubic feet (Mcf)
11
Source: EIA Short-Term Energy Outlook, October 2016.
0
2
4
6
8
10
12
14
16
18
20
Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016 Jan 2017 Jan 2018
winter Residential price
Henry Hub spot price
Short-Term Energy and Winter Fuels Outlook October 13, 2016
EIA forecasts Henry Hub spot prices to average $3.15/MMBtu this winter, but significant uncertainty exists (as always)
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
Jan 2015 Jul 2015 Jan 2016 Jul 2016 Jan 2017 Jul 2017
Henry Hub spot price
STEO price forecast
NYMEX Henry Hub futures price
95% NYMEX confidence interval
12
forecast
Note: Confidence interval derived from options market information for the 5 trading days ending October 6, 2016 Intervals not calculated for months with sparse trading in near-the-money options contracts.Source: EIA Short-Term Energy Outlook, October 2016, and CME Group.
Henry Hub natural gas pricedollars per million Btu
Short-Term Energy and Winter Fuels Outlook October 13, 2016
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Jan 2014 Jan 2015 Jan 2016 Jan 2017 Jan 2018
forecast
10% warmer
Natural gas inventories on September 30 were 90 Bcf higher than last year and 220 Bcf above the previous five-year average
base case
10% colder
13
Note: Gray band represents the range between the minimum and maximum from 2011 to 2015Source: EIA Short-Term Energy Outlook, October 2016.
U.S. total end-of-month working natural gas inventoriesbillion cubic feet
Short-Term Energy and Winter Fuels Outlook October 13, 2016
Heating Oil
14Short-Term Energy and Winter Fuels Outlook October 13, 2016
15
Winter 2016-17 takeaways – Heating oil
• Brent crude oil spot prices are expected to average $48 per barrel (b) this winter, $9/b (22 cents/gal) higher than last winter, but they are not expected to return to levels seen from 2010-14; however, crude oil prices are very uncertain
• Distillate stocks in the Northeast totaled 52.3 million barrels on September 30, 6.9 million barrels (15%) above the same time last year and close to the highest level for any week since 2010
• Unless severely cold temperatures in the Northeast coincide with severely cold temperatures in Europe, ample supplies should be available to meet demand, but localized supply issues are possible
Short-Term Energy and Winter Fuels Outlook October 13, 2016
Note: Home heating oil retail price includes taxes.Source: EIA Short-Term Energy Outlook, October 2016.
monthly average heating oil and Brent crude oil pricesdollars per gallon
0
1
2
3
4
5
Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016 Jan 2017 Jan 2018
winter
home heating oil retail price
Brent crude oil spot price
Short-Term Energy and Winter Fuels Outlook October 13, 2016
Total U.S. distillate inventories are forecast to stay within the five-year range in a 10% colder scenario
0
20
40
60
80
100
120
140
160
180
200
2014 2015 2016 2017 2018
forecast
10% colder
base case
10% warmer
17
Note: Gray band represents the range between the minimum and maximum from 2011 to 2015Source: EIA Short-Term Energy Outlook, October 2016
U.S. total end-of-month distillate fuel inventoriesmillion barrels
Short-Term Energy and Winter Fuels Outlook October 13, 2016
Propane
18Short-Term Energy and Winter Fuels Outlook October 13, 2016
Winter 2016-17 takeaways – Propane
19
• U.S. propane inventories on September 30 were 4 million barrels (4%) higher than year-ago levels, and 28 million barrels (36%) above the five-year average; however, most incremental inventories above five-year average are on the Gulf Coast, distant from the main areas that use propane for heating
• Propane exports have reached record levels in 2016, increasing by 230,000 b/d (41%) during 1H2016 compared with 1H2015
• Propane production at natural gas liquids plants and refineries is expected to be 1% higher than last winter
Short-Term Energy and Winter Fuels Outlook October 13, 2016
EIA’s propane expenditures are expected to be higher than last winter’s level but 18% lower than the average winter expenditures from 2010-11 through 2014-15
percent change from last winter (forecast)
consumptionaverage
pricetotal
expenditures
- - -
- - -
13 14 30
13 7 2115%
36%
32%
16%
Northeast
Midwest
South
West
regional share of all U.S. households that use propane as primary space heating fuel
20
Source: EIA Short-Term Energy Outlook, October 2016
Short-Term Energy and Winter Fuels Outlook October 13, 2016
U.S. propane inventories begin this winter similar to year-ago levels, but near the top of the five-year range
0
20
40
60
80
100
120
2014 2015 2016 2017 2018
forecast
base case
10% colder
10% warmer
21
Note: Gray band represents the range between the minimum and maximum from 2011 to 2015Source: EIA Short-Term Energy Outlook, October 2016
U.S. total end-of-month propane and propylene inventories million barrels
Short-Term Energy and Winter Fuels Outlook October 13, 2016
Electricity
22Short-Term Energy and Winter Fuels Outlook October 13, 2016
Winter 2016–17 takeaways – Electricity
23
• Although residential electricity prices for much of 2016 have been lower than 2015, EIA expects winter residential prices to be slightly higher than last winter
• Because wholesale price increases are slow to pass through to consumers, yearly expenditure deviations are driven more by temperatures
• New natural gas pipeline capacity into New England should help alleviate some competition for the fuel between power generators and residential space heating, but Northeast electricity markets could still be affected by constrained natural gas supplies into the region
Short-Term Energy and Winter Fuels Outlook October 13, 2016
Winter electricity bills are expected to be higher compared with last winter in regions east of the Rocky Mountains
percent change from last winter (forecast)
consumptionaverage
pricetotal
expenditures
-1 1 0
6 0 6
6 2 8
6 1 87%
12%
62%
19%
Northeast
Midwest
South
West
regional share of all U.S. households that use electricity as primary space heating fuel
24
Source: EIA Short-Term Energy Outlook, October 2016
Short-Term Energy and Winter Fuels Outlook October 13, 2016
25
Growth in residential electricity prices has slowed in recent years
Short-Term Energy and Winter Fuels Outlook October 13, 2016
Source: EIA Short-Term Energy Outlook, October 2016