USA EIA Increases Brent Oil Price Forecasts

The U.S. Energy Information Administration (EIA) increased its average Brent spot price forecast for both 2023 and 2024 in its latest short term energy outlook (STEO), which was released on April 11.

According to the April STEO, the EIA now sees the Brent spot price averaging $85.01 per barrel this year and $81.21 per barrel next year. The EIA’s previous STEO, which was released on March 7, projected that the Brent spot price would average $82.95 per barrel in 2023 and $77.57 per barrel in 2024. 

“The Brent crude oil spot price in our forecast averages $85 per barrel in 2023, up $2 per barrel from last month’s forecast,” the EIA stated in the latest STEO.

“The higher price forecast reflects a forecast for less global production in 2023 and a relatively unchanged outlook for global oil consumption,” the EIA added.

“Despite our higher price forecast, recent issues in the banking sector raise the potential that economic and oil demand growth will be lower than our forecast, which has the potential to result in lower oil prices,” the EIA warned in the STEO.

In its April STEO, the EIA noted that it expects global oil markets will be in relative balance over the coming year.

“Global oil inventories, which increased by 0.4 million barrels per day in 2022 and by 1.1 million barrels per day in 1Q23 will be mostly unchanged during the second half of 2023,” the EIA said in the STEO.

“We expect builds will average about 0.5 million barrels per day beginning in 2024. This forecast assumes the recent OPEC cuts expire at the beginning of 2024. Given our forecast of relatively balanced oil markets in 2H23, we expect prices will average $86 per barrel for the rest of 2023,” the EIA continued.

In the STEO, the EIA outlined that downward price pressures emerge in the second quarter of 2024, “when we expect global oil inventories will begin to build more significantly”.

“However, because these builds depend on OPEC increasing its crude oil production, uncertainty in the forecast for this period comes from less oil production than we forecast, which could result in higher prices than in our forecast,” the EIA stated.

$100 Brent?

In an extraordinary market update sent to Rigzone earlier this month, Rystad Energy Senior Vice President Jorge Leon noted that, if fully delivered, the newly announced OPEC+ cuts would further tighten an already fundamentally tight oil market, drive Brent towards $100 per barrel sooner than previously expected and push the price to around $110 per barrel this summer.

Asked if Brent will get to $100 per barrel this year, James Davis, the Director of Short-Term Global Oil Service & Head of Upstream Oil at FGE, told Rigzone, “it is now quite likely that Brent will move to over $100 per barrel this year, given the 1.15 million barrels per day of extra voluntary cuts planned for May by various OPEC+ members”.

When asked the same question, Ed Morse, the Managing Director and Global Head of Commodity Research at Citi Group, told Rigzone, “we think it is highly unlikely that Brent prices will rise above $100 this year and that if it does it won’t likely stay there for long”.

“Yes supply/demand balances are tight? Given the decision of a number of countries to cut production starting in May, market balances are likely to tighten, with inventories changing year-on-year by little more than an average 100 thousand barrels a day,” he added.

“We see more downside than upside risk to our forecast of Brent oil averaging $84 per barrel in 2023,” Morse continued.

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