Natural gas to contribute 33% to electricity generation in 2016- EIA

By Oluwagbenga Bankole

Natural gas is expected to fuel the largest share of electricity generation in 2016 at 33 per cent, compared with 32% for coal according to the Short-Term Energy Outlook of Energy Information Administration (EIA).

According to the report, this would be the first time that natural gas provides more electricity generation than coal on an annual average basis.

It stated that in 2017 natural gas and coal are both forecast to fuel 32 per cent of electricity generation, adding that for renewables, the forecast share of total electricity generation supplied by hydropower rises from 6 per cent in 2016 to 7 per cent in 2017, and the forecast share for other renewables increases from 8 per cent in 2016 to 9 per cent in 2017.

Brent crude oil prices are forecast to average $34/b in 2016 and $40/b in 2017, $3/b and $10/b lower than forecast in last month's STEO, respectively. The lower forecast prices reflect oil production that has been more resilient than expected in a low-price environment and lower expectations for forecast oil demand growth.

Forecast West Texas Intermediate (WTI) crude oil prices are expected to average the same as Brent in 2016 and 2017. However, the current values of futures and options contracts suggest high uncertainty in the price outlook. For example, EIA's forecast for the average WTI price in June 2016 of $35/b should be considered in the context of recent Nymex contract values for June 2016 delivery (Market Prices and Uncertainty Report) suggesting that the market expects WTI prices to range from $24/b to $58/b (at the 95% confidence interval).

U.S. crude oil production averaged an estimated 9.4 million barrels per day (b/d) in 2015, and it is forecast to average 8.7 million b/d in 2016 and 8.2 million b/d in 2017. EIA estimates that crude oil production in February averaged 9.1 million b/d, which was 80,000 b/d below the January level.