EIA expects oil prices to rise this year
Oil inventories expected to decline in 2nd half of year, with lower prices in 2024 on inventory increases, economic uncertainties
The U.S. Energy Information Administration expects higher oil prices for the remainder of 2023, based on its forecast of a decrease in global oil inventories of almost half a million barrels per day in the second half of the year, resulting in rising prices over the remainder of 2023, with Brent crude estimated to average $93 per barrel in the fourth quarter.
This was the agency's projection as it released its September Short-Term Energy Outlook Sept. 12.
The Brent crude oil spot price averaged $101 per barrel in 2022, is estimated to average $84 per barrel for 2023 and $88 per barrel in 2024.
"We expect crude oil prices to rise as global oil inventories decrease through the end of this year," said EIA Administrator Joe DeCarolis. "High oil prices combined with uncertain economic conditions could lessen global demand for petroleum products through 2024."
The agency said production cuts from OPEC+ members continue, but it expects global production to continue increasing this year and next based on production growth in non-OPEC+ countries.
Brent averaged $86 per barrel in August, EIA said, up $11 per barrel since June. The agency attributed the increase in August primarily to Saudi Arabia's extension of its voluntary oil production cuts and U.S. commercial crude inventories ending August at the lowest level since December 2022.
The agency's data show Brent averaged $81.04 per barrel in the first quarter of this year, and $78.02 in the second quarter, with the third quarter estimated at $86.09 and the fourth quarter at $92.68. Estimates for 2024 are $91 per barrel in the first quarter, dropping to $88 in the second quarter and to $87 in both the third and fourth quarters.
Crude productionU.S. crude oil production averaged 11.91 million bpd in 2022 and is estimated to average 12.78 million bpd this year and 13.16 million bpd in 2024.
EIA said that based on Saudi Arabia's Sept. 5 announcement that it would continue its voluntary production cut of 1 million bpd through the end of the year, global oil inventories are forecast to fall by 0.2 million bpd in the fourth quarter.
For the third quarter, the agency said it is estimating global oil inventories will fall by 0.6 million bpd, with inventory draws moderating to 0.2 million bpd in the fourth quarter, with the OPEC+ production cuts keeping "global oil production lower than global oil demand." Potential for a continuation of voluntary cuts creates some upside risk for oil prices, EIA said.
Global oil supply is projected to increase 1.2 million bpd this year and increase by 1.7 million bpd in 2024, driven by non-OPEC+ production, which is forecast to increase by 2 million bpd this year and 1.3 million bpd in 2024, "led by the United States, Brazil, Canada, and Guyana."
Russian production is expected to decline an average of 0.3 million bpd this year and remain relatively stable in 2024, with OPEC crude production forecast to fall by 0.8 million bpd this year and increase by 0.4 million bpd next year.
Natural gasU.S. natural gas consumption is forecast to average 80.5 billion cubic feet per day in September, up 5% from last September and a record for the month, EIA said. "The increase follows a period of elevated natural gas-fired electricity generation from strong U.S. air-conditioning demand in response to summer heat as well as reduced generation from coal-fired plants."
U.S. liquefied natural gas exports averaged 10.6 billion cubic feet per day in 2022 and are estimated to average11.6 bcf per day this year and 13.2 bcf per day in 2024.
U.S. natural gas consumption in the electric power sector is forecast to average 35.3 bcf per day for 2023, up 6%, 2.1 bcf per day from 2022, the previous record high.
Natural gas provides most of the fuel for the increase in summer electricity generation in the U.S., EIA said.
The Henry Hub spot price for natural gas averaged $6.42 per million British thermal units in 2022 and is estimated to average $2.58 this year and $3.24 in 2024.
US motor oil consumptionEIA said it has reduced its vehicle miles traveled, VMT, forecast following release of new population estimates by the U.S. Census Bureau. "The revision increased the share of the U.S. population over 65, which reduced our forecast for VMT and gasoline consumption because it decreased our estimate of the working age population communities."
For the September forecast, the share of the U.S. population over 65 is 18.2% in 2024, up from an August forecast of 18%, EIA said, a change which adds 0.7 million to the population of adults over 65. EIA said the Census Bureau has revised the population under 15 down by 0.5 million and the working age population down by 0.2 million. "We define the working-age population as ages 15-64 because this group accounts for the bulk of the workforce and regular commuting."