The US Energy Information Administration (EIA) has revised its projections for crude oil prices in the Short-Term Energy Outlook (STEO) March issue, forecasting an increase in the Brent crude oil spot price. According to the report, the EIA anticipates the Brent crude oil spot price to average $88 per barrel (bbl) in the second quarter of 2024, marking a $4/bbl rise from its February STEO projections. Additionally, the EIA now expects the Brent price to average $87/bbl for the entirety of 2024, compared to the previously forecasted $82.4/bbl in the February STEO.
This upward adjustment in oil price forecasts is attributed to the extended production cuts by the OPEC+ alliance, officially announced on March 4. The extension of these voluntary production cuts, initially declared on November 30, 2023, now spans through the second quarter of 2024 and includes an additional voluntary production reduction from Russia.
In response to OPEC+’s decision to prolong crude oil production cuts, the EIA has revised its forecast for global oil production growth in 2024 downward. The agency now predicts a substantial decline in global oil inventories, estimating a reduction of 900,000 barrels per day (b/d) in the second quarter of 2024. This marks a significant shift from the previous expectation of relatively unchanged inventories during the same period.
The EIA projects that the tightened oil market balance throughout 2024 will maintain Brent prices above current levels, averaging $88/bbl in the second quarter of 2024, a $4/bbl increase from the previous STEO. However, the agency anticipates a relatively flat trajectory for the remainder of the year until the expiration of OPEC+ supply cuts in 2025, which is expected to exert slight downward pressure on prices.
Following the announcement of the new OPEC+ production cuts, the EIA anticipates a slower growth rate in global liquid fuels production for 2024, with an increase of 400,000 b/d, down from the previously projected 600,000 b/d. This growth is notably lower than the 1.8 million b/d rise observed in 2023.
Despite the limitations imposed by OPEC+ production cuts, non-OPEC+ production is expected to surge by 1.5 million b/d in 2024, driven primarily by increased production from countries in the Americas such as the US, Guyana, Brazil, and Canada. This surge offsets the decline in crude oil production subjected to the OPEC+ agreement, which is projected to decrease by 1.1 million b/d in 2024.
Looking ahead to 2025, the EIA forecasts a 2 million b/d increase in global liquids fuel production, with OPEC+ crude oil production expected to rise by 900,000 b/d as existing production targets expire. Meanwhile, production not bound by the OPEC+ agreement is forecasted to increase by an additional 1.1 million b/d.
Regarding US refinery operations, the EIA notes a sharp decline in refinery inputs in late January and February 2024 due to harsh winter conditions, planned maintenance activities, and unplanned outages. The agency expects low refinery utilization to persist, particularly with the ongoing bp plc Whiting outage and normal seasonal maintenance.
As a result of lower-than-expected crude oil inputs, the EIA anticipates increased builds in US commercial crude oil inventories. February saw a significant deviation from projections, with crude oil inventories estimated to have surged by 21 million bbl, compared to the forecasted 9-million-bbl increase in the February STEO. Additionally, March’s end-of-month crude inventories are projected to be adjusted upward by 16 million bbl compared to the previous STEO.
Despite these adjustments, the EIA expects OPEC+ production restraint to eventually contribute to a reduction in US crude oil inventory draws later in the year, aligning with its earlier forecasts outlined in the February STEO as the market approaches the summer of 2024.
Refinery outages are also affecting motor gasoline production and inventories, with combined inventories in the East Coast and Gulf Coast regions falling about 5% below the 5-year average by end-February. Given the significance of these regions in gasoline production and consumption, their lower inventories are expected to influence total US gasoline availability and prices. The EIA projects that US retail gasoline prices in the second quarter of 2024 will average almost $3.60 per gallon, representing a nearly 20¢/gal increase from the February STEO.