EIA still predicts an increase in oil production

Uncertainty was a major takeaway from the latest short-term energy outlook released by the Energy Information Administration.

Just as signs of recovery from the COVID-19 pandemic were starting to show, Russia’s invasion of Ukraine sent shockwaves through the global oil market.

Due to these recent and possible future events, the EIA provided a statement in an effort to further explain why such uncertainty persists.

“We believe it is more important to understand all the factors generating the uncertainty around our March (short-term energy outlook) forecasts than it is to understand the forecasts themselves,” the EIA said in the news release. “Recent events in the oil market have occurred amid a backdrop of already low inventory levels, which have amplified oil price volatility and contributed to high oil prices.”

Among the factors affecting the global oil market listed by EIA: nations could choose to ban imports of Russian energy, additional sanctions against Russia could be announced, corporations could take additional independent actions that would affect Russia’s oil output, and producers of crude oil outside Russia could respond to higher prices by increasing production.

The EIA has consistently forecast that crude oil production will increase this year and maintains these expectations. This will restore depleted global inventories, which could contribute to a decline in crude oil prices, according to the EIA.

On March 21, the EIA’s most recent weekly fuel report showed a drop in diesel prices for the first time in two months.

However, the EIA statement says the organization will “continue to monitor market dynamics in the energy sector and publish updated information to support a fuller understanding of the evolving situation.” LL