EIA Slashes Oil Price Forecasts
The U.S. Energy Information Administration (EIA) has slashed its oil price forecasts in its latest short-term energy outlook (STEO), which was released on Wednesday.
Brent spot prices are now expected to average $43.30 per barrel in 2020, which marks a sharp decrease from the $61.25 average forecasted in the EIA’s previous STEO, which was released in February. West Texas Intermediate spot prices are now expected to average $38.19 per barrel this year. This figure was previously forecasted to average $55.71 per barrel in 2020.
“As a result of the outcome of the March 6 OPEC meeting, EIA’s forecast assumes that OPEC will target market share instead of a balanced global oil market,” the EIA stated in its latest STEO.
The EIA is forecasting that OPEC crude oil production will average 29.2 million barrels per day (MMbpd) from April through December 2020, which it outlined was up from an average of 28.7 MMpbd in the first quarter. OPEC production data in its March STEO includes Ecuador, however, which finalized its withdrawal from OPEC at the March 6 meeting.
Global petroleum and liquid fuels demand will rise by less than 0.4 MMbpd in 2020, according to the EIA. Lower global oil demand growth for 2020 in the March STEO reflects a reduced assumption for global economic growth along with reduced expected travel globally because of the 2019 novel coronavirus disease, the EIA stated.
The EIA delayed the release of its March STEO by one day “to incorporate recent significant global oil market developments”.
Standard Chartered revealed Monday that it has lowered its 2020 average Brent oil price forecast by $29 per barrel to $35 per barrel.
The company, which believes the collapse of the OPEC+ agreement will lead to a “severe and extended price war”, lowered its second quarter Brent forecast by $38 per barrel to $23 per barrel and its 2021 forecast by $23 per barrel to $44 per barrel.
Oil prices will eventually rebound as current levels are below the marginal cost of production for the majority of operators, according to Jack Allardyce, an oil and gas research analyst at Cantor Fitzgerald Europe.
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