Brent to average $90/bbl in February, oil inventories may rebound from Q2 - EIA
Oil prices are experiencing upward pressure from geopolitical tensions posing supply challenges, the US Energy Information Administration (EIA) says in its short-term energy outlook.
CHART: Data from CME Group and the Intercontinental Exchange, as compiled by Bloomberg. EIA
Global oil inventories were drawn further in January, contrary to its previous forecast of a build, the EIA says. OECD countries’ commercial inventories reached their lowest levels since 2014 to 2.68 billion bbls.
The price of ICE Brent crude has rallied on the back of dwindling inventories, and the front-month contract rose by about $12/bbl in the month ending 3 February.
The EIA acknowledged supply pressures from geopolitical conflicts in Ukraine, the UAE, Libya and Kazakhstan propping up prices further. It predicts that Brent will average $90/bbl in February.
"...low inventory levels create an environment for potentially heightened crude oil price volatility and potential risk for prices to rise significantly if supply growth does not keep pace with demand growth," it says.
Looking ahead, the EIA forecasts that global inventories will start rebuilding from the second quarter and through to the end of the year. This could, in turn, help ease average Brent prices to $87/bbl in the second quarter, $75/bbl in the fourth quarter, and all the way down to $68/bbl for the whole of 2023.
Global supply could get a boost from a 200,000 b/d uptick in average US crude oil production this year, to 12 million b/d. Next year could see a further rise to 12.6 million b/d, which would be the highest since 2019.
