May energy market update

The Energy Information Administration (EIA) recently released its Short-Term Energy Outlook (STEO) for May. The latest report forecasts crude oil prices to rise in the short term due to production disruptions in the Middle East and larger global oil inventory draws. This will likely result in upward pressure on diesel and gasoline prices. Longer term, it continues to forecast downward pressure on crude oil prices as regional production recovers. Natural gas production is expected to keep rising, alongside increasing electricity demand. View the full May STEO report here for detailed insights on energy prices, production, inventories, and more.

Oil spot prices

The weekly West Texas Intermediate oil spot market price spiked in early April to a near four-year high of $105.67 per barrel (b). It has remained elevated since, holding at $105.10 as of May 15 (Figure 1). Recall that last November it reached a near five-year low of $58.69 per barrel.

The May STEO forecasts oil spot prices to hold around $106/b in May and June. As oil production recovers in the Middle East, prices are forecast to fall to an average of $89/b in the fourth quarter and $79/b in 2027.

Gas spot prices

Natural gas spot prices have trended lower in recent months following the 11-month high of $5.01/mmBtu (million metric British thermal units) set in February (Figure 1). Note that this analysis excludes the brief weekly surges often seen in natural gas prices. In early May, we witnessed a 17-month low of $2.66/mmBtu. The price through May 15 has increased to $2.86/mmBtu.

EIA expects natural gas prices to remain steady through the second quarter due to above-average production and higher storage levels. Prices are expected to average roughly $3.50/mmBtu across 2026 and $3.18/mmBtu in 2027.

Rig counts

US drilling activity continues to hover just above historic lows, marginally higher than the multi-year low seen last August. The latest tally through last week amounted to 551, consisting of 415 oil rigs, 128 gas rigs, and 8 miscellaneous rigs (Figure 2). Compared to the same week of 2025, there were 25 fewer rigs in operation last week.

EIA suggests higher oil prices could support an increase in future natural gas production.

Canadian counts are seasonally low but relatively healthy. The latest count was unchanged at 124, made up of 76 oil rigs and 48 gas rigs. Historically, Canadian drilling ramps up at the start of each year then declines across April and May as thawing grounds limit access to drill sites. One year ago, there were three fewer rigs in operation.

Crude stock levels

US crude oil stock levels continue to hold relatively stable, as they have done so since 2024. We saw a minor stock build start in late February through early April, then a destock following that. As of May 15, stocks totaled 819 million barrels, an 11-month low. Stocks are 3% lower than they were this time last year (Figure 4).

Fuel prices

We have added US gasoline and diesel prices to this report. Regular retail gasoline prices have surged since March, with the weekly average rising to a near four-year high of $4.50 per gallon two weeks ago (Figure 5). Through last week, prices remain elevated at $4.49 per gallon, significantly higher than the $3.17 rate seen one year ago.

Diesel prices have followed the same trend but at a stronger rate. In early April, the weekly average retail price rose to $5.64 per gallon, the highest seen since July 2022. Prices matched that high twice in early May, marginally falling to $5.60 per gallon last week. One year ago, diesel was considerably cheaper at $3.54 per gallon.