EIA 201819 Winter Fuels Outlook NASEO-EIA 2018-19 Winter Energy - - PowerPoint PPT Presentation

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U.S. Energy Information Administration

Independent Statistics & Analysis

EIA 2018–19 Winter Fuels Outlook

NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

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 be similar to both last year and the previous 10-year average, with projected heating degree days for the United States on average 1% more than last winter.

• EIA expects heating fuel prices for homes that heat with electricity, heating
• il, natural gas, and propane to be higher than prices last winter.
• 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.

• EIA expects natural gas inventories to end October at the lowest levels for

that time of year since 2005. Inventories of distillate fuel and propane are also below the five-year (2013–17) average in several regions. Although inventory levels are low, EIA expects fuel supplies to be adequate to meet winter demand, but localized supply issue are possible, particularly in the case of severely cold weather.

NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018 2

Heating fuel market shares vary across U.S. regions

Primary home heating fuel by state, 2017

3 NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018 Source: U.S. Energy Information Administration based on 2017 American Community Survey

U.S. current population-weighted heating degree days

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

4 Source: EIA Short-Term Energy Outlook, October 2018. NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018 . Note: EIA calculations based on National Oceanic and Atmospheric Administration (NOAA) data. The dashed lines indicate each month’s prior 10-year average for October 2008–March 2018. Projections reflect NOAA's 14–16 month outlook.

1,000 2,000 3,000 4,000 total winter 250 500 750 1,000 October November December January February March 2015/16 2016/17 2017/18 2018/19 forecast 2008-2018 average colder warmer

Fuel prices are forecast to be slightly higher than last winter, but heating oil prices are expected to remain below levels from 2011–14 when crude oil prices were higher

5

U.S. average residential winter heating fuel prices dollars per million Btu forecast Winter (October–March)

Source: EIA Short-Term Energy Outlook, October 2018.

10 20 30 40 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 natural gas heating oil propane

NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

Fuel expenditures are mostly expected to be higher this winter (October 1–March 31) compared with both last winter and the previous five-year average

6 NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018 Source: EIA Short-Term Energy Outlook, October 2018. 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* 14% 20% Natural gas 6% 5% Propane * 1%

• 1%

Electricity 6% 3% Change in base case forecast fuel expenditures

Colder or warmer (+/- 10% HDD) than forecast winters can swing expected expenditures by as much as 16% or as little as 5% depending on the fuel

7 NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018 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 Case If 10% warmer than forecast If 10% colder than forecast Heating oil* 20% 7% 33% Natural gas 5%

• 4%

16% Propane *

• 1%
• 17%

15% Electricity 3%

• 2%

9% Change in forecast fuel expenditures from last winter

Source: EIA Short-Term Energy Outlook, October 2018.

Propane and heating oil expenditures vary more winter to winter than do electricity and natural gas expenditures

8 NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018 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.

1,000 2,000 3,000 4,000 5,000 12-13 13-14 14-15 15-16 16-17 17-18 18-19 $1,000 propane* heating oil electricity natural gas heating degree days colder warmer $2,000 $3,000 $4,000 $5,000

history forecast

Source: EIA Short-Term Energy Outlook, October 2018.

Winter temperatures and heating expenditures heating degree days dollars per household

Natural Gas

9 NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

Winter 2018–18 takeaways – Natural gas

• As of September 28, inventories of natural gas in working storage were 18%

lower than year-ago levels and 17% below the five-year average.

• Inventories are expected to end October at 3.3 trillion cubic feet, which

would be 14% lower than the five-year average for this time of year.

• Dry natural gas production this winter is forecast to average 86 billion cubic

feet/day, a 10% increase compared with last winter.

• Henry Hub spot prices are forecast to average $3.20/million British thermal

units (MMBtu) this winter, an 8% increase from last winter, because of lower inventory levels.

• Low inventory levels could contribute to localized wholesale price spikes in

the case of very cold weather; however, price spikes do not tend to be reflected immediately in retail prices, and record levels of natural gas production might be reducing the need for inventory holding at the margin.

NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018 10

Natural gas heating expenditures are expected to increase in the West and Midwest and decline in the South and Northeast based

• n the current forecast, but temperatures will be a key variable

Change from last winter (forecast) Consumption Average price Total expenditures

5% 8% 13% 2%

• 3%
• 1%
• 3%

15% 12% 1%

• 3%
• 3%

20% 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 Source: EIA Short-Term Energy Outlook, October 2018. NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

EIA forecasts Henry Hub spot prices (wholesale) to average $3.20/MMBtu this winter, but significant uncertainty exists

12 Note: Confidence interval and futures prices derived from market information for the five trading days ending October 4,

• 2018. Intervals not calculated for months with sparse trading in near-the-money options contracts.

Source: EIA Short-Term Energy Outlook, October 2018, and CME Group.

Henry Hub natural gas price dollars per million Btu

NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

1 2 3 4 5 6 7 2013 2014 2015 2016 2017 2018 2019

95% NYMEX futures price confidence interval upper bound STEO forecast NYMEX futures price 95% NYMEX futures price confidence interval lower bound Henry Hub spot price

EIA expects average residential natural gas prices to be slightly higher than prices last winter

winter average natural gas prices dollars per thousand cubic feet (Mcf)

13 Source: EIA Short-Term Energy Outlook, October 2018, and Thomson Reuters. NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

1 2 3 4 5 6 7 8 9 10 11 12 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 Henry Hub spot price U.S. average residential price

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Jan 2016 Jan 2017 Jan 2018 Jan 2019 forecast 10% warmer

EIA expects natural gas inventories to start the winter at the lowest levels since 2005

base case 10% colder

14 Note: Gray band represents the range between the minimum and maximum from 2013 to 2017. Source: EIA Short-Term Energy Outlook, October 2018.

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

NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

Heating Oil

15 NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

16

Winter 2018–19 takeaways – Heating oil

• EIA expects Brent crude oil spot prices to average $79 per barrel (b) this

winter, $15/b (36 cents/gal) higher than last winter, but they are not expected to return to 2010–14 levels above $100/b; however, crude oil prices are very uncertain.

• Distillate stocks in the Northeast totaled 30.9 million barrels on September

28, 4.6 million barrels (13%) lower than the same time last year and 19% lower than the previous five-year average.

• Unless severely cold temperatures in the Northeast coincide with severely

cold temperatures in Europe, ample distillate supplies should be available to meet demand, but localized supply issues are possible.

• International Maritime Organization 2020 regulations that reduce the amount
• f sulfur allowable in global bunker fuel have the potential to put upward

pressure on heating oil prices in upcoming winters

NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

EIA expects average residential heating oil prices to be 18% higher than prices last winter

monthly average heating oil and Brent crude oil prices dollars per gallon

17 Source: EIA Short-Term Energy Outlook, October 2018, and Thomson Reuters.

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 Jan 2014 Jan 2015 Jan 2016 Jan 2017 Jan 2018 Jan 2019 winter residential heating oil price Brent crude oil spot price forecast

NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

80 90 100 110 120 130 140 150 160 170 180 Jan 2016 Jan 2017 Jan 2018 Jan 2019 forecast 10% warmer

EIA forecasts distillate inventories to remain within the five-year average range, even in the 10% colder scenario

base case 10% colder

18 Note: Gray band represents the range between the minimum and maximum from 2013 to 2017. Source: EIA Short-Term Energy Outlook, October 2018.

U.S. total end-of-month distillate inventories million barrels

NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

Distillate inventories in the Northeast have risen since the summer to move within the five-year range

19 Note: Gray band represents the range between the minimum and maximum from 2013 to 2017. Source: EIA, Weekly Petroleum Status Report.

Northeast region weekly distillate inventories million barrels

NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

10 20 30 40 50 60 70 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 2016 2017 five-year average

Propane

20 NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

Winter 2018–19 takeaways – Propane

21

• EIA forecasts propane production to be 14% higher this winter compared

with last winter, while total propane consumption is expected to be unchanged from last winter and net exports 19% higher.

• U.S. propane inventories at the end of September were 79.4 million barrels,

which was 8% below the previous five-year average for that time of year.

• Inventories in the Midwest, the region most reliant on propane for heating

and agricultural uses, ended September at 3% above the five-year average. Regional detail shows stocks across the northern Midwest at or above the five-year average.

NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

EIA forecasts propane expenditures to be similar to last winter’s level

Change from last winter (forecast) Consumption Average price Total expenditures

n/a n/a n/a n/a n/a n/a

• 3%

1%

• 2%

1% 0% 1%

17% 36% 32% 16% Northeast Midwest South West

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

22 NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018 Note: n/a = not available because of insufficient underlying data to create forecast Source: EIA Short-Term Energy Outlook, October 2018.

20 40 60 80 100 120 Jan 2016 Jan 2017 Jan 2018 Jan 2019 forecast 10% warmer

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

base case 10% colder

23 Note: Gray band represents the range between the minimum and maximum from 2013 to 2017. Source: EIA Short-Term Energy Outlook, October 2018.

U.S. total end-of-month propane inventories million barrels

NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

Midwest propane/propylene inventories in the Midwest are generally above the five-year average

24 Note: Inventories are for refineries, terminals, and natural gas plants and do not include pipelines. Source: EIA, Petroleum Supply Monthly and Weekly Petroleum Status Report. Michigan propane/propylene inventories million barrels NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

2 4 6 8 10 12 14 16 18

Illinois, Indiana, Ohio propane/propylene inventories million barrels

0.0 0.5 1.0 1.5 2.0 2.5 3.0 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

Kansas propane/propylene inventories million barrels

1 2 3 4 5 6 7 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

Iowa, Minnesota, Wisconsin propane/propylene inventories million barrels

0.0 0.2 0.4 0.6 0.8 1.0 1.2 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

Electricity

25 NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

Winter 2018–19 takeaways – Electricity

26

• 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% higher this winter compared

with last winter because of a forecast of slightly higher HDD than last winter.

• EIA expects residential electricity prices to be up 2% 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.

NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

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

Change from last winter (forecast) Consumption Average price Total expenditures

4% 2% 6% 2% 1% 3%

• 2%

3% 1% 1% 2% 3%

7% 12% 61% 19% Northeast Midwest South West Regional share of all U.S. households that use electricity as primary space heating fuel

27 Source: EIA Short-Term Energy Outlook, October 2018 NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018

28

Annual growth in residential electricity prices averaged 1.6% over the past five winters

NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018 Source: EIA Short-Term Energy Outlook, October 2018

U.S. winter average residential electricity price cents per kilowatthour 0% 2% 4% 6% 8% 10% 12% 14% 2 4 6 8 10 12 14 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 average residential price (left axis) annual change (right axis)

29

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

NASEO-EIA 2018-19 Winter Energy Outlook Webinar October 10, 2018