EIA Raises Oil Price Forecast for 2022

The U.S. Energy Information Administration (EIA) raised its Brent spot average price forecast for 2022, its January short term energy outlook (STEO) has revealed.

The organization now sees Brent spot prices averaging $74.95 per barrel this year, which marks a $4.90 increase on its previous 2022 projection of $70.05, which was made in the EIA’s December STEO.

Looking ahead to 2023 for the first time, the latest STEO forecasts that average Brent spot prices will drop to $67.50 per barrel next year. Brent spot prices averaged $70.89 per barrel in 2021, the EIA’s January STEO highlighted.

In its latest STEO, the EIA projects that global oil inventories will increase at a rate of 500,000 barrels per day in 2022 and 600,000 barrels per day in 2023. The EIA estimates that global liquid fuels inventories fell by an average of 1.4 million barrels per day in 2021. These were said to have grown by 2.1 million barrels per day in 2020.

The organization expects global liquid fuels consumption will grow by 3.6 million barrels per day in 2022 and by 1.8 million barrels per day in 2023. OPEC crude oil production is expected to rise by 2.5 million barrels per day to average 28.8 million barrels per day in 2022 and by a further 100,000 barrels per day in 2023 to average 28.9 million barrels per day.

U.S. crude oil production is expected to average 11.8 million barrels per day this year before rising to a new record of 12.4 million barrels per day in 2023. The U.S. was shown to have averaged 11.2 million barrels per day in 2021. Its current record of 12.3 million barrels per day was set in 2019.

The EIA notes that its latest STEO continues to reflect heightened levels of uncertainty as a result of the ongoing Covid-19 pandemic.

“Notably, the Omicron variant of Covid-19 raises questions about global energy consumption,” the EIA noted in its January STEO.

“In addition to macroeconomic uncertainties, uncertainty about winter weather and consumer energy demand also present a wide range of potential outcomes for energy consumption,” the EIA added.

“Supply uncertainty in the forecast stems from uncertainty about OPEC+ production decisions and the rate at which U.S. oil and natural gas producers will increase drilling,” the EIA continued.

At the time of writing, the price of Brent stood at $84.12 per barrel.

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