Highlights

North Sea Brent crude oil prices averaged $57/barrel (b) in July, a $5/b decrease from June. Brent crude oil spot prices fell further in early August, settling at $48/b on August 7. The recent price declines reflect concerns about lower economic growth in emerging markets, expectations of higher oil exports from Iran, and continuing actual and expected growth in global inventories.

EIA forecasts that Brent crude oil prices will average $54/b in 2015 and $59/b in 2016, $6/b and $8/b lower than in last month’s STEO, respectively. Forecast West Texas Intermediate (WTI) crude oil prices in both 2015 and 2016 average $5/b less than the Brent price. The current values of futures and options contracts for November 2015 delivery (Market Prices and Uncertainty Report) suggest the market expects WTI prices to range from $34/b to $64/b (at the 95% confidence interval) in November 2015.

On July 14, the P5+1 (the five permanent members of the United Nations Security Council and Germany) and Iran announced an agreement that could result in relief from United States and European Union nuclear-related sanctions (which include some oil-related sanctions). If the agreement is implemented and sanctions relief occurs, it will put additional Iranian oil supplies on a global market that has already seen oil inventories rise significantly over the past year. This forecast assumes sanctions relief occurs in 2016, contributing to an annual average increase in Iranian crude oil production of 0.3 million b/d from 2015 to 2016, with most of the increase coming in the second half of 2016.

U.S. regular gasoline monthly average retail prices averaged $2.79/gallon (gal) in July, a decrease of 1 cent/gal from June and 82 cents/gal lower than in July 2014. EIA expects monthly average gasoline prices to decline from their July level to an average of $2.11/gal during the fourth quarter of 2015. EIA forecasts U.S. regular gasoline retail prices to average $2.41/gal for all of 2015.

EIA estimates total U.S. crude oil production declined by 100,000 barrels per day (b/d) in July compared with June. Production is expected to continue decreasing through mid-2016 before growth resumes late in 2016. Projected U.S. crude oil production averages 9.4 million b/d in 2015 and 9.0 million b/d in 2016, 0.1 million b/d and 0.4 million b/d lower, respectively, than in July’s STEO.

Natural gas working inventories were 2,912 billion cubic feet (Bcf) on July 31, which was 23% higher than a year earlier and 2% higher than the previous five-year average (2010-14). EIA projects inventories will close the injection season at the end of October at 3,867 Bcf, which would be the second-highest end-of-October level on record.

U.S. population-weighted cooling degree days through the end of July were 14% more than in the same period last year. The hotter temperatures contribute to an EIA estimate that the typical residential electricity customer will use 3,134 kilowatthours in the months of June, July, and August this year, which is 4% more than during the same period in 2014.