The U.S. Energy Information Administration (EIA) announced on October 8 that it has reduced its 2024 crude oil price forecasts by nearly $2 per barrel and by $6.50 per barrel for 2025. This decision stems from worries about global demand growth, which overshadow the short-term uncertainty related to the escalating tensions between Israel and Iran.
In its October Short-Term Energy Outlook, the EIA stated that concerns about global oil demand will likely keep prices lower than previously anticipated in both 2024 and 2025. The EIA adjusted its 2024 forecast for Brent crude down by $1.91, bringing it to $80.89 per barrel. The agency also cited a $6 drop in September prices, leading to a $6.50 reduction in its 2025 Brent outlook, now set at $77.59 per barrel. Additionally, the forecast for West Texas Intermediate (WTI) crude was lowered by $1.89 for 2024, while the 2025 expectation was cut by $6.50, bringing it to $73.13 per barrel.
The EIA explained, “Following the September price drop and our expectations of lower oil demand growth next year, we have adjusted our crude oil price forecasts downward, even though oil prices have increased in early October.” The agency noted that no oil supplies have been affected by the heightened military activity in the Middle East as of the latest report. However, it acknowledged that recent conflicts have escalated without a clear resolution timeline, raising the risk of supply disruptions and price volatility. Despite this, the EIA highlighted the availability of significant surplus crude oil production capacity, which could be utilized if disruptions occur.
Due to OPEC+ production cuts, global oil production remains below consumption levels, resulting in inventory withdrawals. The EIA estimated that global oil inventories fell by 800,000 barrels per day (b/d) in the third quarter of 2024 and projected a further decline of 600,000 b/d in the first quarter of 2025. This trend supports the agency’s expectation of a rise in Brent prices, although the increase is now expected to be smaller than previously forecasted in September.
The EIA also anticipates accelerated oil production growth by mid-2025, driven by increases from OPEC+ and rising output in the United States, Guyana, Brazil, and Canada.
In September, the EIA continued to lower its forecast for global liquid fuel consumption, primarily due to reduced crude oil imports and refinery operations in China. While the agency acknowledged recent monetary stimulus that could boost economic growth and crude demand in China, it kept its 2025 growth rate forecast for the country largely unchanged.
The EIA adjusted its global oil demand outlook down by 40,000 b/d for 2024 to 103.06 million b/d and lowered its 2025 estimate by 250,000 b/d to 104.35 million b/d.
These changes in the crude oil forecast have influenced expected U.S. retail gasoline prices. The EIA maintained its previous prediction of $3.33 per gallon for the remainder of 2024 but now expects gasoline prices to decline to an average of $3.22 per gallon in 2025, a decrease of 7 cents from last month’s estimate.
The EIA also raised its expectations for retail diesel prices in 2025, projecting the fuel to cost $3.55 per gallon, which is 18 cents lower than the prior estimate. Diesel prices are expected to remain steady in 2024, averaging $3.76 per gallon, a slight decrease of 2 cents from September’s prediction.
In addition, the EIA reduced its 2024 outlook for U.S. oil production by 30,000 b/d to 13.22 million b/d. Nevertheless, it still forecasts continued growth in output for 2025, projecting U.S. crude production to reach 13.54 million b/d. This represents a 130,000 b/d decrease from last month’s estimate, reflecting a minor expected slowdown in U.S. exploration and production activity based on recent industry surveys.
This month, the agency also released its 2024 Winter Fuels Outlook, detailing its annual expectations for U.S. residential energy consumption, prices, and expenditures during winter. This report includes predictions for natural gas, propane, heating oil, and electricity. The EIA expects costs to remain largely stable compared to last winter, as declining energy prices offset forecasts of colder weather.
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