According to the U.S. Energy Information Administration’s (EIA) monthly Short-term Energy Outlook report released on Tuesday, global crude oil inventories are projected to decrease over the next 15 months. However, despite this optimistic forecast, worries surrounding the global economy and weaker energy demand may potentially limit any significant price gains for oil.
The EIA highlights that the Organization of the Petroleum Exporting Countries (OPEC) decision to extend its oil output cuts until 2024 and Saudi Arabia’s extension of its voluntary cuts until August have played a crucial role in reducing near-term oil supplies. As a result, the agency anticipates a decline in global oil inventories across the next five quarters.
While production cuts and rising demand are expected to have a positive impact on prices in the future, the EIA forecasts that spot prices for the global benchmark Brent crude will rise to $81 a barrel by the end of this year.
Moreover, the EIA states that global oil inventories will witness a transition from inventory builds during the first half of this year to consistent inventory draws until the fourth quarter of 2024.
Projected figures suggest that Brent crude is projected to average $83.51 in 2024, remaining unchanged from the EIA’s previous forecast in June. Additionally, the EIA predicts that prices for the U.S. crude benchmark West Texas Intermediate will average $78.51 next year, also unchanged from its previous forecast.
Overall, while the outlook demonstrates a decline in global crude oil inventories and potential price increases, concerns persist due to uncertainties surrounding the global economy and energy demand.
Oil Prices Rise in Tuesday’s Trading
In Tuesday’s trading, oil prices experienced an upward trend. The front-month August WTI oil contract traded at $74.76 a barrel on the New York Mercantile Exchange, representing a $1.77 increase, equivalent to a 2.4% rise. Similarly, the September Brent oil added $1.74, or 2.2%, bringing the price to $79.43 a barrel on ICE Futures Europe.
Brent Oil’s Stable Average Price in June
According to the EIA, Brent oil maintained an average price of $75 per barrel in June, which was unchanged from May. This stability can be attributed to ongoing concerns about weakening global economic conditions, which have limited expectations for global oil demand growth. These factors counteracted the upward price pressure resulting from tighter near-term oil supplies.
Lowered Price Forecasts for U.S. Natural Gas
The government agency also revised its price forecasts for U.S. natural gas in 2023 and 2024 downward. The new projections indicate an average price of $2.62 per million British thermal units for this year, reflecting a 1.3% decrease compared to the June forecast. For 2024, the forecasted price is $3.29, down 3.9% from the previous estimate.
Despite these adjustments, the anticipated average price for 2024 remains higher than current prices. On Tuesday, August natural-gas futures were traded at $2.72 per million Btus.
Expected Rise in Prices at Henry Hub
The EIA predicts that natural-gas prices at Henry Hub in Louisiana, the delivery point for Nymex natural-gas futures, will increase in the coming months. This projected rise is due to declining natural-gas production, which is expected to narrow the existing surplus of natural-gas inventories compared to the five-year average.