EIA shifts forecast amid uncertainty of global oil shipments

In a change from its January outlook, the Energy Information Administration now expects an increase in oil prices in early 2024.

Ongoing military attacks on commercial ships traveling the Red Sea are the major component of the uncertainty surrounding global oil shipments, according to EIA.

“Longer routes put upward pressure on freight rates because of fuel costs and fewer available ships,” EIA said.

#TodayInEnergy – #RedSea attacks increase shipping times and freight rates #oil #LNG #LPG https://t.co/kVh3jbWjJ7 pic.twitter.com/b18XDCEuRb

— EIA (@EIAgov) February 1, 2024

In its February outlook, EIA said the Brent crude oil price increased in January to $80 per barrel. That price is expected to continue to rise until at least the second quarter of 2024. Based upon the forecasted increase to global inventories, prices should begin to see downward pressure at that point.

“Ongoing risks of supply disruptions in the Middle East create the potential for crude oil prices to be higher than our forecast,” EIA said.

Oil production in the U.S. set a record of 13.3 million barrels per day in December 2023. EIA expects a return to those levels of production this month.

Fuel forecast

The fuel portion of EIA’s outlook remained about the same as the previous month. It projected that in the first quarter of 2024, diesel will average $3.94 per gallon and fall to $3.92 in the second quarter. EIA also said the national fuel average will continue to fall and will hit $3.84 in the third quarter of this year, before an increase to $3.97 per gallon by the end of 2024.

Other EIA takeaways

Natural gas consumption increased significantly due to extreme weather in January.

“The cold weather last month sent us into record-setting natural gas consumption territory for a few days, but we expect less-than-average consumption going into February and March,” EIA Administrator Joe DeCarolis said in a news release. “Any late-winter cold snaps could introduce significant volatility back into the natural gas market.”

EIA is forecasting 43% more electricity generated from solar as well as a 6% increase in wind generation.

Lower coal production is expected due to planned coal-fired plant retirements.

View the full EIA short-term energy outlook here. LL

More Land Line news.