The front-month futures price for Brent crude oil settled at $73.45/bbl on Aug. 2, a decrease of $3.85 from July 2. The front-month futures price for West Texas Intermediate crude oil for delivery at Cushing, Okla., decreased $4.98/bbl during the same period, settling at $68.96/bbl on Aug. 2.
Crude oil production from most members of the Organization of Petroleum Exporting Countries, Russia, and other oil-exporting countries were estimated to be higher in July compared with the average for this year’s first half. In addition, a faster-than-expected return of Libyan crude oil production following last month’s unplanned supply outage could have put downward pressure on oil prices.
In its latest Short-Term Energy Outlook (STEO), the US Energy Information Administration forecasts that global petroleum inventories will decrease by an average of 100,000 b/d during the final 5 months of 2018 and then increase by an average of 300,000 b/d in 2019. EIA forecasts Brent crude oil prices to average $73/bbl in this year’s second half and to decline to an average of $71/bbl in 2019.
“Higher production from OPEC and Russia compared with the first half of this year probably put downward pressure on crude oil prices in recent weeks, and we continue to expect Brent crude oil spot prices to fall towards $70/bbl by the end of 2018, as the market appears to be fairly balanced in the coming months,” said Linda Capuano, administrator of the US Energy Information Administration.
Meantime, even though EIA forecasts oil prices continuing to moderate in the coming months, global oil inventories are below 5-year average levels and OPEC spare capacity is low, which could contribute to price volatility and possible price increases if supply disruptions occur.
The August STEO estimates that US crude oil production held steady just under 11 million b/d in July. EIA also is expecting production to rise by about 1 million b/d in the coming year, with production almost reaching 12 million b/d by yearend 2019.
If oil prices continue to come down or remain flat in the coming months, EIA expects that US gasoline prices will have reached their 2018 peak in May and, at this time, EIA continues to forecast that retail gasoline will average below $2.80/gal through yearend 2019.
Despite the record-high natural gas power burn and relatively low gas inventory levels, record-high US gas production growth could be keeping prices from rising, EIA said.
“Continuing developments in natural gas, including drilling productivity improvements and new infrastructure, factored into EIA’s August forecast for US dry natural gas production, which we currently expect will exceed 84 bcfd for all of 2019.” Capuano said.
US gas exports are poised to reach record levels in 2018 and 2019. EIA’s August forecast expects new pipelines to Mexico will help push pipeline exports in 2018 to nearly 7 bcfd before topping 8 bcfd in 2019.
