But truckers, farmers, and other users of diesel fuel may not see much price relief of that fuel as stocks remain tight.
U.S. domestic crude oil production this year was projected to average 6.3 million barrels per day, up 700,000 per day from a year ago, based on estimates from the Energy Information Administration (EIA).
Domestic crude oil production next year was projected to jump to 6.9 million barrels per day which, if realized, would be the highest level since 1993, according to EIA.
“We have a case out there where oversupply is going to help bring (oil) prices down,” said Jackie McKinnis, GROWMARK energy analyst.
EIA this month in its short-term energy outlook projected the price of West Texas intermediate oil (the benchmark for U.S. prices) could ease from an average of $96 per barrel this year to $93 in 2013 while Brent crude from the North Sea was projected to decline from $111 per barrel this year to $103 next year.
The dotted lines on the chart are a gap that's created when the basis moves very quickly. A few times this year have seen up to 20 cents move in one day. (Graphic by Jackie McKinnis)
Oil prices likely won’t drop dramatically, though, according to McKinnis.
Oil consumption was projected to increase 2.7 percent this year and 2.5 percent next year. Meanwhile, refining issues could keep pressure on fuel prices, particularly diesel.
The average price of a gallon of gas nationwide last week was $3.82 per gallon, up 34 cents from a year ago, while diesel averaged $4.15 per gallon, up 31 cents.
“We’ve got plenty of crude in the U.S., but not plenty of refined product,” McKinnis said. “Prices could remain range-bound.”
The supply of refined oil products has been tight due to planned fall maintenance shutdowns at some refineries, unexpected outages at other refineries, and economics that encourage the export of product from the Midwest rather than shipping it to either U.S. coast.
“We’re especially short on diesel stock,” McKinnis said.
Refinery issues and tight refined product supplies have led to wide swings in the basis market (cash compared to futures prices) at Chicago. The situation has added volatility to prices at the pump, the analyst noted.
In other energy news, EIA this month in its winter fuels outlook projected household expenditures for heating oil and natural gas this winter will increase 19 and 15 percent, respectively, compared to last year.
Expenditures also were projected to increase for electricity (5 percent) and propane (13 percent) compared to a year ago.
The forecast reflects a return to normal winter temperatures east of the Rockies compared to last year’s unusual warmth.