Global crude oil inventories are set to decline over the next 15 months, but worries about the global economy and prospects for weaker energy demand are likely to limit any price gains for oil, according to the U.S. Energy Information Administration’s monthly Short-term Energy Outlook report released on Tuesday.
The Organization of the Petroleum Exporting Countries’ decision to extend its oil output cuts through 2024 and Saudi Arabia’s extension of its voluntary cuts through August have led to a reduction in expected near-term oil supplies, the EIA said. It sees global oil inventories declining over the next five quarters.
The government agency expects production cuts and rising demand to increase prices going forward, with spot prices for global benchmark Brent crude forecast to rise to $81 a barrel by the end of this year.
Global oil inventories will transition from inventory builds, on average, during the first half of this year to “consistent” inventory draws until the fourth quarter of 2024, the EIA said.
It sees Brent averaging $83.51 in 2024. That’s unchanged from its June forecast. For U.S. crude benchmark West Texas Intermediate, the EIA sees prices averaging $78.51 next year, also unchanged from its previous forecast.
In Tuesday dealings, the front-month August WTI oil contract
CLQ23,
CL.1,
traded at $74.76 a barrel on the New York Mercantile Exchange, up $1.77, or 2.4%. September Brent oil
BRNU23,
BRN00,
added $1.74, or 2.2%, to $79.43 a barrel on ICE Futures Europe.
The EIA said Brent oil’s average price of $75 a barrel in June was unchanged from May as “ongoing concerns regarding weakening global economic conditions continued to limit expectations for global oil demand growth, which countered upward price pressure from tighter near-term oil supplies.”
In its monthly report, the government agency also lowered its 2023 and 2024 price forecasts for U.S. natural gas. It sees an average price of $2.62 per million British thermal units this year, down 1.3% from the June forecast, and $3.29 for 2024, down 3.9% from the previous forecast.
Still, the average 2024 price would be higher than current prices. August natural-gas futures
NGQ23,
NG00,
traded at $2.72 per million Btus on Tuesday.
Prices for the commodity at Henry Hub, La., the delivery point for Nymex natural-gas futures, will rise in the coming months as declining natural-gas production “narrows the existing surplus of natural-gas inventories compared with the five-year average,” the EIA said.
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