EIA forecasts gradual decline in Brent crude prices, return to normal inventory by 2023
The US Energy Information Administration (EIA) forecasts the price of Brent crude to average $75/bbl this year, up from $71/bbl in 2021
PHOTO: A pumpjack (oil derrick) and oil refinery in Seminole, West Texas. EIA forecasts that US crude oil production may rise to a record 12.4 million b/d in 2023, higher than the 2019 output record of 12.3 million b/d in 2019. Getty Images
But as global crude inventory levels will recover to normal levels in 2023, the average Brent price will be pulled down to $68/bbl next year, it says.
“Crude oil prices remain volatile because of the continued uncertainty surrounding the Omicron variant and how it will affect oil markets and the economy as a whole,” the EIA says.
The forecast assumes that OPEC+ will continue to increase output by 400,000 b/d per month until the group has phased back all of the output cuts it made in April 2020.
“If OPEC countries choose to produce from this capacity rather than hold it as spare, prices would likely be lower than our forecast,” EIA says.
Amid a visible shortfall in some OPEC member countries’ output from the monthly target set by OPEC+, EIA expects OPEC members countries’ crude oil production to average 28.8 million b/d in 2022, and tick up to 28.9 million b/d in 2023.
These production levels would be a significant bump up from the 26.3 million b/d produced by OPEC countries in 2021.
Oil well freeze-offs and shut-ins during Hurricane Ida reduced US oil production in 2021 by 0.1 million from 2020, EIA says.
US crude oil production is forecast to recover to 11.8 million b/d in 2022, and to a record 12.4 million b/d in 2023 - higher than the current record 12.3 million b/d in 2019.
However, EIA does not expect monthly production to surpass the monthly record of 12.97 million b/d set in November 2019.
On Wednesday, the front-month ICE Brent crude contract hit a two-month high of $84.97/bbl, buoyed by US Fed Chair Jerome Powell’s assurance in a US congressional hearing that “what we are seeing is an economy that functions through these waves of COVID."
Brent was also propelled up towards $85/bbl by weekly EIA figures showing commercial US crude stocks have been drawn to their lowest point since October 2018, and from another week of big stock builds for gasoline and distillates - pointing to a slowdown in demand.
