EIA Boosts Brent and WTI Oil Price Forecasts

The U.S. Energy Information Administration (EIA) increased its Brent and West Texas Intermediate (WTI) spot average price forecasts for both 2023 and 2024 in its latest short term energy outlook (STEO), which was released this week.

In the latest STEO, the EIA projected that Brent spot prices will average $84.46 per barrel this year and $88.22 per barrel next year and that WTI spot prices will average $79.65 per barrel in 2023 and $83.22 per barrel in 2024.

In its previous STEO, the EIA predicted that Brent spot prices would come in at $82.62 per barrel this year and $86.48 per barrel next year. In that STEO, the WTI spot price was anticipated to average $77.79 per barrel in 2023 and $81.48 per barrel in 2024.

The EIA’s latest STEO sees the Brent spot price averaging $86.09 per barrel in the third quarter, $92.68 per barrel in the fourth quarter, $91 per barrel in the first quarter of 2024, $88 per barrel in the second quarter of next year, and $87 per barrel in both the third and fourth quarter of 2024.

The WTI spot price will average $81.48 per barrel in the third quarter, $87.68 per barrel in the fourth quarter, $86 per barrel in the first quarter of next year, $83 per barrel in the second quarter, and $82 per barrel in both the third and fourth quarters, according to the September STEO.

“Following Saudi Arabia’s September 5 announcement to extend its voluntary one million barrel per day production cut through the end of this year, we expect that global oil inventories will fall over that period, adding upward pressure to oil prices in the coming months,” the EIA said in its latest STEO.

“The Brent crude oil spot price in our forecast averages $93 dollars per barrel in the fourth quarter of 2023. Prices should decline beginning in 2024 as oil inventories build, with prices averaging $88 per barrel next year,” it added.

“The inventory builds next year largely reflect slowing oil demand growth, non-OPEC oil production growth, and the end of Saudi Arabia’s voluntary production cuts,” the EIA continued.

The EIA noted in the September STEO that its current assessment is that global oil inventories are falling by 0.6 million barrel per day in the third quarter.

“Inventory draws moderate to 0.2 million in 4Q23, but OPEC+ cuts to oil production keep global oil production lower than global oil demand,” the EIA said in the STEO.

“As a result, we expect the Brent spot price will remain above $90 per barrel through 1Q24 before averaging $87 per barrel over the remaining three quarters of next year,” it added.

“However, the potential for continued voluntary production cuts creates some upside risk for oil prices,” it continued.

In a report sent to Rigzone this week, analysts at BofA Global Research said Brent prices could spike past $100 per barrel before year end “should OPEC+ maintain cuts against Asia’s positive demand backdrop”.

“Following the crisis that shook energy markets last year, Asia is leading once again global energy demand growth despite concerns about China’s economic outlook,” the analysts said in the BofA Global Research report.

“While industrial activity and real estate are weak, transportation trends in China remain rather positive, keeping petroleum fuel export quotas low and Asian product markets relatively tight. Moreover, China has continued to build oil inventories for months to match its increasing import dependency,” they added.

“Meanwhile, China domestic refineries have been running strong, ultimately pushing crude imports to a near-record 12.4 million barrels per day in August. Should OPEC+ maintain the ongoing supply cuts through year-end against Asia's positive demand backdrop, we now believe Brent prices could spike past $100 per barrel before 2024,” they continued.

In another report sent to Rigzone this week, analysts at Standard Chartered projected that Brent will average $93 per barrel in the fourth quarter of 2023. 

“That forecast has been unchanged for the past 15 months despite Brent trading across a $50 per barrel range during that time,” the analysts said in the report.

“Given prompt prices are now within range of the forecast and we think fundamentals will remain highly supportive, we see no reason to change. We do, however, caution that our forecast is a period average rather than a point forecast and hence does not rule out an intra-Q4 high above $100 per barrel,” they added.

“We think the main fundamental uncertainty is potential upside risk to our Q4 demand estimates, adding a further potential layer of price support,” they continued.

In the report, the analysts said oil prices have been driven higher in the third quarter by sharp falls in inventories caused by excess demand.

“We expect that dynamic to continue in Q4. According to our supply and demand model, global inventories rose by 203 million barrels in H2-2022; in sharp contrast, we forecast that global inventories will fall by 313 million barrels in H2-2023,” the analysts said.

“We expect draws to average 1.4 million barrels per day in Q4; while this is lower than Q3’s 2.0 million barrel per day average draw and August’s peak 3.1 million barrel per day draw, it represents a significant additional tightening from a base of already low inventories,” they added.

“The year on year tightening from the Q4-2022 surplus to the Q4-2023 deficit amounts to 2.4 million barrels … While we expect China’s demand growth to be relatively slow and U.S. supply growth to be relatively fast, a sizeable net tightening remains, reinforced by the large year on year reductions in OPEC supply,” they continued.

In a separate report sent to Rigzone recently, BMI, a Fitch Solutions company, revealed that it sees Brent averaging $80 per barrel this year, $83 per barrel in 2024 and 2025, and $80 per barrel in 2026 and 2027. A Bloomberg Consensus included in the report projected that Brent would average $81 per barrel in 2023, $83 per barrel in 2024, $81 per barrel in 2025, $78 per barrel in 2026, and $70 per barrel in 2027. BMI is a contributor to the Bloomberg Consensus.

At the time of writing, Brent Crude oil is trading at $92.38 per barrel, while WTI Crude is trading at $89.00 per barrel.

To contact the author, email andreas.exarheas@rigzone.com