• EIA's Latest Short-Term Outlook Highlights Uncertainty in Oil Markets

  • EIA's Latest Short-Term Outlook Highlights Uncertainty in Oil Markets

    With the possibility of supply disruptions and demand destruction "relatively
    balanced," the U.S. Energy Information Administration (EIA) is forecasting
    Brent crude spot prices will average $64/bbl in the second half of 2019 and
    $65/bbl in 2020.

    "The combination of oil supply disruption risk and lower economic growth
    expectations creates uncertainty in the pace of global oil inventory
    withdrawals and prices," EIA said Tuesday in its latest Short Term Energy
    Outlook. "However, given the uncertainty in the risk factors discussed, prices
    could break out of the mid-$60/b range if the supply or demand concerns
    materialize in the coming months."

    The U.S. agency said it expects prices for West Texas Intermediate (WTI) crude
    oil to average $5.50/bbl less than Brent prices during the fourth quarter of
    this year and in 2020, narrowing from the $6.60/bbl spread during July.

    The agency said the narrowing spread reflects its assumption that
    transportation constraints from the Permian Basin to Gulf Coast refineries and
    export terminals will ease in the coming months. Last month, EIA forecast the
    Brent-WTI spread to average $4.00/bbl in 2020. The agency said the change
    reflects its assumptions about the costs of moving crude by pipeline from the
    hub at Cushing, Okla., to the Gulf Coast.

    On the supply side, EIA forecasts U.S. crude oil production will hit record
    levels of 12.3 million b/d in 2019 and 13.3 million b/d in 2020.

    EIA forecasts that global oil inventories will increase by 100,000 b/d in 2019
    and 300,000 b/d in 2020.

    When examining the competing pressures on oil prices, EIA noted continued
    tensions in the Middle East and the Strait of Hormuz presents a risk of supply
    disruptions, although crude exports from the region have not yet been disrupted.

    Meanwhile, demand concerns include a slowdown in global economic growth and in
    global manufacturing activity.

    The EIA forecast said it appears U.S. regular retail gasoline prices peaked for
    the year in May at an average $2.86/gal and will likely fall to an average
    $2.64/gal in September. Regular gasoline retail prices will average $2.62/gal
    in 2019 and rise to an average $2.71/gal in 2020, the agency forecast.

    --Steve Cronin, scronin@opisnet.com

    Copyright, Oil Price Information Service