Spot prices of Brent crude oil averaged $107/bbl in July, marking the 13th consecutive month in which the average price has ranged $107-112/bbl. Compared with the volatility seen as recently as 2 years ago when Brent spot prices ranged as high as $125/bbl in March 2012 to as low as $95/bbl in June 2012, this price stability has been remarkable, according to the US Energy information Administration.
Implied volatility—a measure of expected price variation—for the near-month Brent futures contract has averaged 18% over the past 12 months compared with 28% during the previous 24 months.
“Although supply growth from non-OPEC countries has outpaced world consumption in the past year, its potential price-reducing effect has been offset by unplanned supply outages among producers in the Organization of the Petroleum Exporting Countries. The result has tightened world oil markets and placed upward pressure on prices,” EIA said.
Growing crude oil production from US tight oil formations has led to reduced petroleum imports, freeing previously imported barrels for non-US consumption. Largely as a result, Brent crude oil prices fell from an average of $112/bbl in 2012 to $109/bbl in 2013.
Meanwhile, since June 2013, OPEC supply has fallen by 0.6 million b/d, decreasing in 7 of the past 13 months, primarily due to unplanned supply disruptions caused by political unrest in Libya and Iraq.
According to the August 2014 Short-Term Energy Outlook, EIA expects continued strong growth in non-OPEC supply to place downward pressure on Brent crude oil prices, despite recent disruptions to OPEC supply and tighter world oil balances, causing them to gradually decrease through 2015.
EIA forecasts total world petroleum and other liquids supply to grow by 1.5 million b/d and 1.3 million b/d in 2014 and 2015, respectively, while Brent crude oil prices will fall from an average of $108/bbl in 2014 to an average of $105/bbl in 2015.