The U.S. Energy Information Administration (EIA) predicts Brent Crude oil prices to average $71 a barrel for the rest of this year and to stay around $68 a barrel in 2019, the agency said today.
The predictions were part of EIA’s June 2018 update of its Short-Term Energy Outlook (STEO). The updated 2019 forecast price is $2 a barrel higher than the May STEO. Brent crude oil spot prices averaged $77 a barrel in May, an increase of $5 a barrel from April and the highest monthly average price since November 2014. West Texas Intermediate (WTI) prices are forecast to average almost $7 a barrel lower than Brent prices in 2018 and $6 a barrel lower in 2019.
Crude oil prices have increased as global oil inventories have declined from January 2017 through April 2018. Even though the 2019 oil price forecast is higher than it was in the May STEO, EIA expects oil prices to decline in the coming months because global oil inventories are expected to rise slightly during the second half of 2018 and in 2019, the agency said.
Oil inventory is expected to outpace forecasted oil demand growth next year. EIA currently forecasts global petroleum and other liquids inventories will increase by 210,000 barrels per day next year, a factor that, all else being equal, typically puts downward pressure on oil prices, the report said.
Most of the growth in global oil production in the months ahead is expected to come from the U. S. EIA projects that the country’s crude oil production will average 10.8 million barrels a day for 2018, up from 9.4 million barrels a day in 2017, and will average 11.8 million barrels a day in 2019.
If those averages hold true, they would be the highest levels of production on record, surpassing the previous record set in 1970, EIA noted.
Tight oil production in the Permian region of West Texas and New Mexico is the main driver of rising U.S. production. Among other countries outside of the Organization of the Petroleum Exporting Countries (OPEC), Canada and Brazil are also expected to experience significant growth in oil production in 2019.
EIA expects that OPEC crude oil production will average 32.0 million barrels a day in 2018, a decrease of about 0.4 million barrels a day from the 2017 level. Total OPEC crude oil output is expected to increase slightly in 2019 to an average of 32.1 million barrels a day. The 2018 and 2019 levels are 0.2 million barrels a day and 0.3 million barrels a day lower, respectively, than what was forecast in the May STEO, stemming frm revised expectations of crude oil production in Venezuela and Iran.
The lower OPEC forecast is one of the main reasons EIA expects oil prices to be slightly higher in 2019 compared with last month’s forecast.
OPEC, Russia, and other non-OPEC countries will meet on June 22 to assess current oil market conditions associated with their existing crude oil production reductions. Current reductions are scheduled to continue through the end of the year. Oil ministers from Saudi Arabia and Russia have announced that they will re-evaluate the production reduction agreement given accelerated output declines from Venezuela and uncertainty surrounding Iran’s production levels.
The June STEO assumes declining Venezuelan and Iranian crude oil production in 2019 will be offset by increasing production from Persian Gulf producers, mostly Saudi Arabia.
However, much depends on the outcome of the June 22 meeting.
Overall, EIA expects global oil production to increase by almost 2.0 million barrels a day in 2019 compared with forecast oil demand growth of 1.7 million barrels a day.