EIA boosts WTI, Brent crude price forecasts on OPEC+ supply cuts

The US Energy Information Administration April 11 raised its crude price forecasts for 2023, citing the decision by OPEC and its allies to cut production by 1.6 million b/d.

The agency, in its April Short-Term Energy Outlook, raised its 2023 Brent crude forecast by 2.5% to $85.01/b and its 2024 Brent forecast by 4.7% to $81.21/b. The EIA raised its 2023 WTI price outlook by 2.8% to average $79.24/b, and its 2024 WTI forecast by 5.1% to $75.21/b.

While the EIA expects global liquid fuels consumption to rise 1.4 million b/d in 2023 to 100.87 million b/d, and to 102.72 million b/d in 2024, it also expects production to rise despite the OPEC+ cuts.

"The OPEC+ production cut is certainly significant, but we expect growing global production—especially in North and South America—to offset those cuts," said EIA Administrator Joe DeCarolis in a press release accompanying the report.

The EIA anticipates global liquid fuel production to increase by 1.5 million b/d in 2023 to 101.3 million b/d, and to 103.3 million b/d in 2024, on growth in non-OPEC countries.

US crude oil production was forecasted slightly higher at 12.5 million b/d for 2023, and at 12.8 million b/d for 2024. The rate of US production growth was stronger in the 2022-2023 period at 5.5% and is expected to slow down to 1.7% between 2023-2024.

The EIA expects Russia's liquids production to fall to 10.6 million b/d in 2023 and to 10.4 million b/d in 2024, raising its forecast by roughly 300,000 b/d from its March STEO.

"Although we still expect Russia's production to fall this year, Russia's production outpaced our earlier expectations because its exports have continued to find buyers in markets outside of Europe," EIA said in its release.

The EIA also noted that recent turmoil in the US and European banking sector could lead to weaker-than-expected demand growth, which may result in lower oil prices.

In the summer, the agency expects US gasoline prices to average at $3.42/gal, up nearly 2% from its previous forecast. For 2024, the EIA raised its gasoline price forecast by 2.2% to $3.18/gal.

"Across the oil price cases we examined, our models still showed average U.S. household gasoline expenditures remaining lower than last year," DeCarolis said, explaining that consumption this year remained lower on average.

Overall, US production is expected to outpace consumption in 2023, which could lead to higher gasoline inventories, lower prices and greater exports compared to 2022. The agency expects US gasoline consumption at 8.86 million b/d for 2023 and for 2024.

"In 2023, we estimate refinery production of gasoline will increase by more than U.S. consumption, raising stocks, lowering prices, and increasing net exports compared with 2022," the EIA said. "In the forecast, net exports of gasoline average 810,000 b/d in 2023, up from 780,000 b/d in 2022, in response to increased U.S. gasoline production and more consumption globally."

The EIA expects distillate exports to also remain high, with "net exports averaging 1.1 million b/d in both 2023 and 2024."

"Calls on U.S. distillate exports to replace sanctioned volumes in Europe are likely to increase U.S. distillate exports in 2023," the EIA said.