As truckers well know, U.S. diesel prices rose more than 2 cents a gallon to $3 on January 8, which is 40 cents higher than it was that time a year ago. That’s because the price of oil, from which diesel is made, is going up. And it will likely continue its upward trajectory.
Brent crude oil is projected to average $60 a barrel this year and increase to $61 a barrel in 2019, the U.S. Energy Information Administration (EIA) reported in its Short-Term Energy Outlook Wednesday.
West Texas Intermediate (WTI) crude oil spot prices are expected to average $55 a barrel this year and $57 a barrel in 2019, the report said, with global oil production to be slightly greater than consumption, creating “modest” inventory builds. A contributing factor is that U.S. oil production is expected to increase faster than production in any other country.
U.S. production prices will need to compete for market share in Asia, and EIA estimated that “without pipeline constraints,” moving crude oil from Cushing to the U.S. Gulf Coast, which typically costs $3.50 a barrel, will probably cost $0.50 a barrel more to transport WTI from the U.S. to Asia than to ship Brent from the North Sea to Asia.
Average WTI prices are forecast to stay between $4 and $5 a barrel lower than Brent prices this year and next.
EIA expects global inventories to increase by some 0.2 million barrels a day this year and by about 0.3 million barrels a day in 2019 and will contribute to Brent crude prices declining from the current level of about $69 a barrel to an average of $60 a barrel for the first quarter of the year.
U.S. crude oil production is forecast to increase to an average of 10.3 million a barrel, up 1.0 million barrels a day from 2017.
Crude oil production by the Organization of the Petroleum Exporting Countries (OPEC) averaged 32.5 million barrels a day in 2017, a decrease of 0.2 million barrels a day from 2016.
This was mainly because of OPEC’s November 2016 decision to cut crude output to 32.5 million barrels a day and the organization’s subsequent decision in November 2017 to extend its production cuts through the end of this year to reduce global inventories.
EIA expects India and China to spur growth in consumption of petroleum and other liquid fuels this year and the next.