May energy market update

The Energy Information Administration (EIA) recently released its May Short-Term Energy Outlook (STEO). The latest report projects continued downward pressure on crude oil prices, driven by rising production (mainly from non-OPEC+ countries) and slower demand growth. As inventories build, oil prices are expected to soften further. Meanwhile natural gas prices are expected to recover in the coming months due to higher seasonal demand and increased exports. View the full May STEO report here covering energy spot prices, production, inventories, and more.

Oil spot prices

The weekly West Texas Intermediate oil spot market price started trending downward at the start of the year and continues to do so. As of May 9, the spot price has fallen to a four-year low of $60.39 per barrel (b) (Figure 1), levels last seen in early 2021. Recall that in late February, prices slipped beneath the $70-90 per-barrel range they had generally remained in over the two previous years.

The May STEO forecasts oil spot prices to average $62/b across the second half of the year (down from $68/b previously) and for 2026 to average $59/b (down from the $61/b).

Gas spot prices

Following the multi-decade lows seen in 2024, natural gas spot prices surged from November through February due to increased winter heating demand. Prices briefly reached a two-year high in February of $5.90/mmBtu (million metric British thermal units). The market has trended down since, driven by milder weather and higher-than-normal storage injections. In late-April spot prices fell to a near three-month low of $3.00/mmBtu. Prices have moderately recovered since. The latest weekly natural gas spot price is up to $3.19/mmBtu as of May 9.

EIA revised its natural gas forecast slightly lower in May, though prices are still expected to increase. They forecast prices to average $4.20/mmBtu across 2025, down from their prior estimate of $4.30/mmBtu.

Rig counts

The latest count of drill rigs operating in the US fell by two to 576 rigs this week. This rate is tied with January for the lowest weekly rate seen in nearly three and a half years (Figure 2). US activity has remained at reduced levels for nearly a year now.

Canadian counts broke their seasonal decline this week, rising by seven to 121 rigs (Figure 3). Canadian activity typically surges early in the year, then declines through April as thawing ground conditions limit access to drilling sites.

Crude stock levels

US crude oil stock levels continue to gradually recover through May, rising to a two-year high last week of 841 million barrels. Stock levels are 4% higher than they were at the beginning of the year and 2% higher than levels one year ago (Figure 4).