Short-Term Energy Outlook

World oil markets tightened in recent weeks in response to production cuts by members of the Organization of Petroleum Exporting Countries (OPEC) and the return of cold winter weather in North America.

February's cold weather and higher demand for heating fuels reduced petroleum inventories (both crude and product) more than expected and raised spot prices for crude oil and natural gas, which had fallen in January.

Average monthly motor gasoline prices are expected to increase by nearly 40 cents per gallon from February ($2.28 per gallon) through June, peaking at $2.67 per gallon. Rising crude oil prices and seasonal demand are the principal drivers for this expected increase. The projected average of about $2.60 per gallon for the upcoming driving season (April-September) would be about 20 cents per gallon less than last year's driving season average. Next month, the outlook for motor fuels will be updated and examined in detail in the Summer Fuels Outlook.

Projections of U.S. heating fuel expenditures for the winter of 2006-07 have increased to $898 compared with $862 in the last Outlook, due to February's unusual cold weather (Heating Fuel Expenditures). Nevertheless, this amount still represents a decline from $948 last winter. - Source: Energy Information Administration