WASHINGTON – Crude oil prices increased during the first three weeks of July 2013 as world oil markets tightened in the face of seasonal increases in world consumption, unexpected supply disruptions, and heightened uncertainty over the security of supply with the renewed unrest in Egypt. The U.S. Energy Information Administration (EIA) expects that the Brent crude oil spot price, which averaged $108 per barrel over the first half of 2013, will average $104 per barrel over the second half of 2013, and $100 per barrel in 2014.

The discount of West Texas Intermediate (WTI) crude oil to Brent crude oil, which averaged $18 per barrel in 2012 and increased to a monthly average of $21 per barrel in February 2013, closed below $1.50 per barrel on July 19, 2013, and averaged $3 per barrel for the month. The strong demand for light, sweet crude oil in the Midwest and new pipeline capacity to deliver production from the West Texas Permian Basin directly to the Gulf Coast contributed to the price of WTI rising relative to Brent crude oil. EIA expects the WTI discount to widen to $6 per barrel by the end of 2013 as crude oil production in Alberta, Canada, recovers following the heavy June flooding and as midcontinent production continues to grow.

Rising crude oil prices and seasonal demand increases contributed to U.S. regular gasoline retail prices increasing from an average of $3.50 per gallon on July 1, 2013, to $3.63 per gallon on August 5. EIA expects the regular gasoline retail price to average $3.59 per gallon in the third quarter of 2013, and the annual average price to decline from an average of $3.63 per gallon in 2012 to $3.52 per gallon in 2013 and to $3.37 per gallon in 2014.

U.S. crude oil production increased to an average of 7.5 million barrels per day (bbl/d) in July 2013, the highest monthly level of production since 1991. EIA forecasts U.S. total crude oil production will average 7.4 million bbl/d in 2013 and 8.2 million bbl/d in 2014, both about 0.1 million bbl/d higher than forecast in last month’s STEO.