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US EIA expects surging winter fuel spending as gasoline prices top $3/gal

Highlights

Heating spending to rise on fuel costs, colder weather

US gasoline prices rise further in October to $3.21/gal

EIA trims 2022 global oil demand growth by 150,000 b/d

US household spending on all major home-heating fuels will surge this winter because of higher fuel costs and an expected colder weather, and gasoline prices will remain above $3/gal on a national average through the end of the year, the Energy Information Administration said Oct. 13.

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The higher energy prices will likely continue to pressure the Biden administration as it seeks to drive federal energy policy toward cleaner fuels and show global leadership at the UN climate talks.

In its latest Short-Term Energy Outlook, the EIA said US household spending on propane will spike 54% this winter compared with last year, and heating oil costs will be up 43%.

US retail prices for regular-grade gasoline, which typically fall in September, are expected to rise again in October to $3.21/gal before falling to $3.05/gal in December, it said. The September average of $3.18/gal was $1/gal higher than a year earlier as weak global demand during the pandemic kept oil prices low.

"As we have moved beyond what we expect to be the deepest part of the pandemic-related economic downturn, growth in energy demand has generally outpaced growth in supply," EIA Acting Administrator Steve Nalley said in a statement. "These dynamics are raising energy prices around the world."

Falling oil stocks

The EIA boosted its outlook for crude oil futures by nearly $3/b for 2021 and nearly $6/b for 2022.

It now sees WTI crude prices averaging $68.48/b in 2021 and $68.24/b in 2022. It expects Brent prices to average $71.38/b in 2021 and $71.91/b in 2022.

Brent prices are expected to remain near current levels for the rest of the year, averaging $81/b for the fourth quarter, or a $10/b spike from EIA's forecast last month.

"The higher forecast reflects our expectation that global oil inventories will fall at a faster rate than we had previously expected owing largely to lower global oil supply in late 2021 across a range of producers," EIA said. "In 2022, we expect that growth in production from OPEC+, US tight oil, and other non-OPEC countries will outpace slowing growth in global oil consumption and contribute to Brent prices declining from current levels to an annual average of $72/b."

US output, global demand

The EIA kept its outlook for US oil production steady from last month at 11.02 million b/d in 2021 and 11.73 million b/d in 2022.

It sees US production crossing back above 12 million b/d for the first time since the pandemic in November 2022 but remaining well below the November 2019 peak of 12.97 million b/d.

The EIA boosted its estimate for 2021 global oil demand growth by 90,000 b/d to 5.05 million b/d but eased its outlook for 2022 growth by 150,000 b/d to 3.48 million b/d.