(S&P Global Platts) Builds in global oil inventories seen for the first time in two years have helped to ease crude oil prices, the US Energy Information Administration said on July 12 as it lowered its 2022 oil price expectations by more than $3/b from the prior month.
But with oil inventories expected to remain below the five-year average through most of 2022 and 2023, the agency warned that the potential for oil price volatility remains high.
The EIA, in its July Short-Term Energy Outlook, now sees WTI this year averaging $98.79/b, down $3.68/b from last month, and expects Brent in 2022 to average $104.05/b, down $3.32/b from the prior month. For 2023, the EIA expects WTI at $89.75/b and sees Brent at $93.75/b, both down $3.49/b from the prior month.
“Reduced exports of refined petroleum products from Russia as a result of sanctions and less global refining capacity than before 2020 have reduced the available supply of refined petroleum products and have led to higher retail prices for gasoline and diesel fuel,” the agency said in its report. “This situation could persist and may limit the degree to which lower crude oil prices result in lower retail prices for gasoline and diesel.”
The agency ticked down its 2022 outlook for US oil production by 10,000 b/d to 11.91 million b/d. The EIA’s estimate for US oil production in 2023 dropped by 200,000 b/d to 12.77 million b/d, but would still surpass the previous record for annual average output of 12.3 million b/d set in 2019.
The EIA decreased its global oil demand estimate for 2022 by 50,000 b/d to 99.58 million b/d. But its global demand forecast for 2023 rose by 260,000 b/d to 101.58 million b/d.
The July report assumes that OPEC+ countries will not fully increase production in accordance with their targets this year as “some countries will be unable to meet their new targets because of limited production capacity, and other countries will limit increases because of uncertainty over the magnitude of Russia’s oil losses as well as weakening global oil demand,” the EIA said.
OPEC crude oil production averaged 28.3 million b/d in the first half of 2022, and the agency expects that output to increase to 29.1 million b/d in the second part of the year and rise to 29.3 million b/d in 2023.
