EIA Cuts 2023 and 2024 Brent Oil Price Forecasts

The U.S. Energy Information Administration (EIA) cut its Brent oil price forecast for 2023 and 2024 in its latest short term energy outlook (STEO), which was released this week.

The EIA’s December STEO projected that the Brent spot price will average $82.40 per barrel this year and $82.57 per barrel next year. The commodity is expected to come in at $83.89 per barrel in the fourth quarter of 2023, $83.30 per barrel in the first quarter of 2024, $84.03 per barrel in the second quarter, $82 per barrel in the third quarter, and $81 per barrel in the fourth quarter of next year, according to the EIA’s latest STEO.

In its previous STEO, which was released in November, the EIA projected that the Brent spot price would average $83.99 per barrel in 2023 and $93.24 per barrel in 2024. That STEO saw the Brent spot price averaging $90.27 per barrel in the fourth quarter of 2023, $93.64 per barrel in the first quarter of next year, $94.34 per barrel in the second quarter, $93 per barrel in the third quarter of 2024, and $92 per barrel in the fourth quarter.

“The Brent crude oil spot price averaged $83 per barrel in November, a decrease of $8 per barrel compared with October,” the EIA noted in its December STEO, adding that “this decrease was largely the result of ongoing concerns around global oil demand growth”.

“Although crude oil prices declined further during the first week of December, with the Brent spot price closing close to $76 per barrel on December 8, we expect upward crude oil price pressures in the coming months as global oil inventories decline in our forecast in the first quarter of 2024,” the EIA said in the STEO.

The forecast decline in oil inventories is driven in part by the recently announced OPEC+ production cuts on November 30, the EIA stated in its latest outlook.

“We forecast the Brent price will increase from an average of $78 per barrel in December 2023 to an average of $83 per barrel for all of 2024,” the EIA noted in the December STEO.

“Our forecast annual peak in the mid-$80 per barrel range at the end of 1Q24 was about $10 per barrel higher than futures contracts for delivery during that period when we closed STEO forecast runs,” it added.

“We expect OPEC+ production cuts will offset lower global demand growth, prevent increases in global oil inventories, and keep Brent prices above $80 per barrel next year,” it continued.

“Although we forecast crude oil prices to increase from the current price, we reduced our forecast for the 2024 annual average Brent price by $11 per barrel from our November STEO,” the EIA went on to state.

A Macquarie report sent to Rigzone this week showed that the company forecasts that Brent will average $82.21 per barrel in 2023 and $77 per barrel in 2024. Macquarie expects the commodity to average $84.33 per barrel in the fourth quarter of this year, $79 per barrel in the first quarter of 2024, $76 per barrel in the second quarter, $79 per barrel in the third quarter, and $74 per barrel in the fourth quarter of next year, according to the report.

“Crude price has fallen around 25 percent from September highs as balances have realized looser than consensus expectations,” Macquarie strategists said in the report.

“After some brief support from the Israel-Hamas conflict, risk premium has exited price alongside a large decrease in speculator length, predominately on the managed money side,” they added.

“Following draws in 2023 Q3, global crude inventories have built amidst turnaround season as supply has continued to grow. Although actual demand growth remains resilient, macro concerns have brought 2024 demand growth into question and increased downside volatility to price,” they continued.

In the report, the strategists said, “based on price action since the November 30 OPEC+ meeting, the agreement appears to have fallen short of market expectations, with KSA’s unilateral cuts through 2024 Q1 already having been priced in potentially”.

“At face value, the meeting appears to demonstrate some progress around more equitable burden-sharing between KSA and OPEC+ partners,” they added.

“That said, responsive non-OPEC supply may continue to challenge the ability of OPEC+ to support price, as the call on OPEC could continue to fall while markets find balance at lower prices than many may anticipate,” they went on to state.

To contact the author, email andreas.exarheas@rigzone.com