Oil Slides as US Energy Agency Forecasts Price Surge
Oil prices decline in the global commodity market as the US Energy Information Administration (EIA) revised up its forecast ahead of OPEC monthly report.
ICE Brent crude traded at $84.36 per barrel, down by 0.35% from the closing price of $84.66 per barrel in the previous trading session.
The American benchmark West Texas Intermediate (WTI) traded at $81.24 per barrel at the same time, a 0.20% fall from the previous session that closed at $81.41 per barrel.
In its Short-Term Energy Outlook (STEO) released on Tuesday, the agency said that Brent crude oil price will average $89 per barrel in the second half of 2024, up from $84 per barrel in the first half of the year.
‘Higher prices in the second half of the year result from our forecast of persistent withdrawals from global oil inventories,’ the report read.
The EIA estimated that global oil inventories decreased by 500,000 barrels per day (bpd) in the first half of 2024 and will fall by 700,000 bpd in the second half of the year.
‘Inventory withdrawals stem in part from OPEC+ production cuts, which the group announced in early June would remain at current levels until at least the end of September,’ the EIA said.
EIA forecasts that Brent will reach $86.37 per barrel and the American West Texas Intermediate (WTI) will hit $82.03 per barrel in 2024. These figures were $84.15 and $79.70, respectively, in the previous month’s report.
For next year, the agency expects Brent crude to average $88.38 per barrel and WTI to average $83.88 per barrel. Likewise, oil production in the US is expected to average 13.25 million bpd in 2024, up from 12.93 million bpd last year. The figure is around 10,000 bpd more than the previous month’s forecast.
Next year, crude oil output in the country is expected to reach 13.77 million bpd, up by about 60,000 bpd from last month’s prediction.
The agency also forecasts that average global oil production will be 102.43 million bpd at the end of the year and 104.6 million bpd next year.
Global oil demand, meanwhile, is anticipated to reach 102.91 million bpd in 2024, while demand is expected to be around 104.68 million bpd in 2025.
In the market, Brent fell below the 100-day moving average during the trading session, although prices should find some support along the 50-day and 200-day moving averages, said ING commodities strategists Warren Patterson and Ewa Manthey in a note today,.
Analysts noted that limited disruptions to energy infrastructure in the US Gulf Coast following Hurricane Beryl have eased some supply concerns. Fed Chair Powell’s testimony to the US Senate shouldn’t have had much of an impact on markets, according to Patterson and Manthey.
In minute released, Powell signaled a willingness to cut rates but also stated that more progress is required in bringing inflation down.
Risks related to reducing policy restraint too soon or too much, as well as too late or too little were highlighted. Expectations for a September rate cut have changed little following the testimony, analysts said.
For US natural gas output, the EIA forecasted last month that dry gas production would fall 1.7bcf/d in 2024, however, the agency now expects output to fall by just 0.3bcf/d this year.
Growth for 2025 has been trimmed from 2.3bcf/d last month to 1.7bcf/d currently. OPEC will release its latest monthly oil market report today.
“We will be keeping an eye on the group’s demand growth forecasts for this year and next”, ING said. OPEC has been consistently more aggressive than the IEA with its demand numbers in recent months.
Last month OPEC was forecasting oil demand to grow by 2.25 million b/d and 1.85 million b/d in 2024 and 2025 respectively, well above IEA demand growth forecasts of 960,000 b/d for 2024 and 1 million b/d for 2025. Deschamps Blames Failure in Front of Goal for France’s Euro 2024 Exit
