The US Energy Information Administration (EIA) lowered its forecast for global crude oil prices for 2021 and kept them unchanged for 2022 on Wednesday, reflecting market concerns over demand impacts from the possible continuance of the COVID-19 pandemic and spread of the Delta variant.
In the September Short-Term Energy Outlook (STEO), the EIA revised down its Brent crude oil price outlook for 2021 to an average of $68.61 per barrel, marking a decrease of 0.14%, compared to the August STEO. The forecast reflects the fall in global oil demand expectations.
The agency stressed that Brent and WTI prices both decreased in the first half of August on the back of increasing OPEC+ crude oil production and flattening global petroleum demand in response to rising COVID-19 cases.
For 2022, the agency is keeping its previous estimate for Brent unchanged at $66.04 per barrel.
The EIA said it expects that continuing growth in production from OPEC+ producers and accelerating growth in US tight oil production -- along with other supply growth -- will outpace decelerating growth in global oil consumption and contribute to declines in Brent prices.
The statistics agency said in the near term, the impact of Hurricane Ida on US offshore production, reported incidents at Mexican offshore facilities, and lower-than-expected production in several non-OPEC countries have contributed to lower crude oil production, offsetting some of the price effects of the lower-than-expected oil demand.
'How the market will continue to process news about further COVID-19 outbreaks, even in countries with rising numbers of vaccinated people, remains an important uncertainty in our forecast,' it said.
The EIA expects OPEC crude oil production to average 26.4 million barrels per day (b/d) in 2021, about 0.1 million b/d lower compared with its previous forecast, reflecting the estimates that Iran’s crude oil production will be lower than expected in the second half of the year.
In 2022, the agency expects that OPEC will produce 28.3 million b/d, down 0.3 million b/d compared with the August STEO.
'The production decisions of OPEC+ given an evolving demand outlook will also be a key driver of oil price formation in the coming months,' the EIA said, predicting that OPEC+ will generally produce at a level that achieves a relatively balanced oil market.
The outlook also included forecasts on global consumption of petroleum and liquid fuels to average 97.4 million b/d for all of 2021, showing a 5 million b/d increase from 2020, while in 2022 it is expected to average 101 million b/d.
Crude oil output in the US is expected to average 11.8 million b/d in 2022, up from 11.1 million b/d in 2021. The agency forecast that the change in figures would be driven by growth in onshore tight oil production.
The agency noted that more than 90% of crude oil production in the Federal Offshore Gulf of Mexico (GOM) was offline in late August following Hurricane Ida. As a result of the outage, GOM production averaged 1.5 million b/d in August, down 0.3 million b/d from July.
'We expect that crude oil production in the GOM will gradually come back online during September and average 1.2 million b/d for the month before returning to an average of 1.7 million b/d in the fourth quarter of 2021,' the EIA said.
By Sibel Morrow