The Energy Information Administration on Tuesday raised its oil-price forecasts for this year and next, and said it expects U.S. production to hit record highs as global supplies tighten following a decision by major oil producers last weekend to extend their production cuts through 2024.
The U.S. government agency also increased its forecasts for retail gasoline prices and reduced its outlook for natural-gas prices.
In its monthly Short-term Energy Outlook report released Tuesday, the EIA raised its 2023 forecast for U.S. benchmark West Texas Intermediate crude prices
to $74.60 a barrel, up 1.3% from the May forecast. For 2024, it increased its forecast by 13% to $78.51.
For global benchmark Brent crude
the government agency lifted its 2023 forecast by 1.1% to $79.54 and its 2024 forecast by 12.1% to $83.51.
WTI and Brent crude futures traded lower on Tuesday.
The changes to the EIA’s oil-price forecast follow a predicted slowdown in production growth. For 2024, it lowered its forecast for total world crude oil and liquid fuels production by 0.3% to 102.69 million barrels per day, but left its 2023 forecast nearly unchanged at 101.37 million barrels a day. The predicted totals for this year and next would still mark growth from world output of 99.42 million bpd in 2022.
Those forecasts include expected 2024 output of 33.84 million barrels a day in output from members of the Organization of the Petroleum Exporting Countries, which is down 1.8% from the May forecast.
OPEC along with its allies, led by Russia, moved to extend existing oil-production cuts through 2024 on Sunday, while Saudi Arabia voluntarily agreed to deliver an additional 1 million-barrel daily output cut next month.
The EIA’s forecasts for total world consumption of crude oil and liquid fuels are generally unchanged, at 101.01 million bpd for 2023 and 102.71 million bpd for 2024. Those would compare to consumption of 99.42 million bpd in 2022, according to the EIA.
The government agency said expects U.S. crude-oil production will set annual record highs in 2023 and 2024, though growth in domestic crude-oil production is slowing.
It attributed slower production growth to a combination of the use of capital to increase dividends and repurchase shares instead of investments in new production, as well as the effects of tighter labor markets and higher costs, and increased pressure on oilfield supply chains.
For the U.S., the EIA sees crude-oil production of 12.61 million bpd this year, up 0.6% from its May report, while 2024’s forecast was lifted by 0.7% to 12.77 million bpd.
Petroleum products and natural gas
Consumption of liquid fuels, such as gasoline and jet fuel, are expected to establish new record highs this year and next, the EIA said. It said demand would be driven largely by non-OECD countries, especially China.
“We expect to see demand for travel continue to increase, which drives our forecast for record consumption of petroleum products,” said EIA Administrator Joe DeCarolis, in a statement. “The petroleum market remains highly uncertain, so we will continue monitoring developments and tracking supply and demand dynamics.”
The EIA pegged its forecasts for total U.S. petroleum and other liquid fuels consumption at 20.43 million bpd this year, and 20.69 million bpd in 2024.
Also in its report, the EIA also lifted its forecasts for retail gasoline prices, by 1.7% to $3.39 a gallon for this year, and by 6.9% to $3.30 next year.
“We expect new refinery capacity along the Gulf Coast and an end to refinery maintenance in early June will increase gasoline production,” the report said. “Rising gasoline production contributes to rising gasoline inventories, which we forecast will put downward pressure on gasoline crack spreads and retail prices beginning in July.”
For Henry Hub spot natural-gas prices
however, the EIA forecast a price of $2.66 per million British thermal units, down 8.8% from the May report. For 2024, it predicts a price of $3.42, down 8% from its previous forecast.
The EIA estimates that U.S. dry natural-gas production reached a record average of 104 billion cubic feet per day in April. It said it expects natural-gas production to remain just below that level for the rest of the year.
“Drilling in the Permian Basin typically produces a blend of hydrocarbons that includes crude oil and natural gas. So as producers increase their crude oil production in the region, we expect natural gas production to increase as well,” said DeCarolis.