Though many day traders base their decisions on technical trends, savvy commodity traders also incorporate factual fundamental reports into their research to ensure that they are on the right side of the trade at all times. For energy traders, the data and outlook provided by the U.S. Energy Information Administration (EIA) are some of the most important reports to follow [for more commodity news and analysis subscribe to our free newsletter].
Earlier this month, the EIA released its November edition of the short-term energy outlook, highlighting where exactly they think gasoline, crude oil, and natural gas are headed in the New Year. Below, we take a closer look at EIA’s report, outlining the key statistics traders need to know:
The EIA reported that the U.S. average regular gasoline retail price has fallen by more than $0.40 cents per gallon since the beginning of September. For the fourth quarter of 2013, analysts expects the average retail price to come in at $3.24 per gallon.
Annually, the EIA believes gasoline prices will average $3.39 per gallon in 2014; slightly less than the expected $3.50 average in 2013. U.S. gasoline consumption is also expected to fall 0.4% next year, as more and more consumers switch to more fuel efficient vehicles.
WTI Vs. Brent Crude Spread Expected to Shrink
According to the November report, the EIA expects the spread between the spot price of WTI crude oil to Brent to continue shrinking in 2014. For the fourth quarter, the EIA expects WTI crude oil prices to average $97 per barrel; analysts also expect the discount of WTI crude to Brent to be $10 per barrel during the last quarter.
In 2014, WTI crude prices are forecasted to average $95 per barrel. The WTI discount to Brent is expected to be only $8 per barrel next year. North Sea Brent Crude is forecasted to decline gradually, averaging $106 per barrel in December and $103 per barrel in 2014 [see Why the WTI Vs. Brent Crude Spread Is Shrinking].
U.S. Crude Production on the Rise
Next year, the EIA expects U.S. crude oil production to rise from an average of 6.5 million barrels per day in 2013 to 8.5 million barrels per day in 2014. The agency noted that it expects the bulk of production growth to come from drilling in tight oil plays in the onshore Bakken, Eagle Ford, and Permian regions. Offshore production from the Gulf of Mexico is forecasted to rise to 1.3 million barrels per day in 2014 from the expected 1.2 million barrels per day in 2013.
Outside of the U.S., the EIA has forecasted total OPEC liquid fuels production to decline by 0.8 million barrels per day to 35.9 million barrels per day in 2014. OPEC production is expected to stay at this level throughout 2014. For non-OPEC liquid fuels production, EIA expects to see an increase of 1.5 million barrels per day in 2014, largely due to North American producers [see A Visualization of U.S. Crude Oil Production].
Natural Gas Production to Increase, Consumption to Remain Subdued
For natural gas, the EIA expects production to increase from 70.3 billion cubic feet per day in 2013 to 71.0 bcf/d in 2014. Natural gas consumption, however, is not expected to increase as much in 2014, with analysts forecasting U.S. consumption to come in at 69.3 bcf/d in 2014, down from the expected 70.13 bcf/d in 2013 [see Africa: The New Frontier For Europe's Refiners].
Inventory levels are expected to average 3,266 bcf in 2013 and 3,351 bcf in 2014. For March 2014, the EIA expects inventories to come in at 1,882 bcf, a slight increase from the year-ago level of 1,724. Investors should keep a close eye on March inventories because they tend to mark the lowest storage level of the year before cold weather recedes and stockpiles begin rebuilding.
Disclosure: No positions at time of writing