EIA short-term forecast optimistic despite OPEC cuts

The Energy Information Administration remains optimistic about short-term crude oil prices, according to its short-term energy outlook released on Oct. 12.

This prediction comes after OPEC+ recently announced it would cut production by 2 million barrels per day.

“The global landscape for liquid fuels is complicated, but we expect that limited demand growth will partially offset price increases that would normally result from a cut in production,” EIA Administrator Joe DeCarolis said in a news release. “We expect that increases in vehicle fuel efficiency will offset increases in driving by U.S. motorists in the short term.”

Production and consumption

EIA is forecasting the Brent crude oil price to average $93 per barrel in the fourth quarter and to $95 per barrel for 2023.

OPEC+ production will fall to an average of 28.6 million barrels per day for the fourth quarter of 2022 and the first quarter of 2023 after production cuts, says the EIA forecast.

However, U.S. crude oil production is forecasted to average 11.7 million barrels per day in 2022 and 12.4 million barrels per day in 2023. This would surpass the previous U.S. record set in 2019.

Global consumption is expected to increase to 2.1 million barrels per day for 2022 and by an average of 1.5 million barrels per day in 2023.

In terms of diesel prices, EIA predicts a $4.86 per-gallon average for the fourth quarter, and $4.29 per gallon in 2023.

Not so optimistic

As a supplement to its short-term energy outlook, EIA released its winter fuels outlook, and has predicted an increased cost for heating fuels this winter.

“Forecasting months-long weather and energy trends is not an exact science, but it’s highly likely that global dynamics affecting energy commodities will lead to higher U.S. prices for heat this winter,” DeCarolis said in the news release.

The full EIA short-term energy outlook can be found here. LL