Prices for both light, sweet crude and Brent crude were up Sept. 12 on renewed concerns of a consumption and production imbalance.
In its September Short-Term Energy Outlook, the US Energy Information Administration forecasts Brent crude prices to average $74/bbl and West Texas Intermediate prices to average more than $67/bbl in 2019. Both forecasts are $3/bbl higher than those from the August STEO (OGJ Online, Sept. 12, 2018).
The higher price forecast reflects a lower forecast for global oil supply in 2019 based on lower expected production from the US, Canada, and the Organization of Petroleum Exporting Countries (non-crude liquids). The lower production forecast is only partially offset by lower forecast oil demand for next year.
EIA forecasts total global liquid fuels inventories to decrease by 400,000 b/d in 2018 compared with 2017. This is followed by an increase of 100,000 b/d in 2019, which is 200,000 b/d lower than previously forecast.
In its latest Oil Markets Forecast released today, the International Energy Agency pointed to a mixed picture in looking for production to compensate for export declines from Venezuela and Iran. Brazil’s output will rise by only 30,000 b/d this year vs. an earlier estimate of 260,000 b/d. US production continues to grow, but companies are not adjusting production plans along with higher prices due to infrastructure bottlenecks. Libyan production surged in August to 950,000 b/d, but the situation is fragile as recent attacks on National Oil Corp.’s headquarters show, the report said.
As far as oil demand is concerned, the report continued, following an increase of 1.4 million b/d in 2018, growth next year will be 1.5 million b/d. Even so, the report said, in 2018, “we are seeing signs of weaker demand in some markets: gasoline demand is stagnant in the US as prices rise; European demand in the period May-July was consistently below year-ago levels; demand in Japan is sluggish notwithstanding very high temperatures and will be further impacted by the recent natural disasters.”
According to the IEA, the oil market is entering a crucial period. “The situation in Venezuela could deteriorate even faster, strife could return to Libya and the 53 days to Nov. 4 will reveal more decisions taken by countries and companies with respect to Iranian oil purchases. It remains to be seen if other producers decide to increase their production,” the report said.
Energy prices
The light, sweet crude contract for October delivery on the New York Mercantile Exchange increased $1.12 to $70.37/bbl on Sept. 12. The November contract jumped $1.12 to settle at $70.16/bbl.
The NYMEX natural gas price for October remained virtually unchanged at a rounded $2.83/MMbtu. The Henry Hub cash gas was $2.93/MMbtu, up 4¢.
Ultralow-sulfur diesel remained virtually unchanged for October at a rounded $2.25/gal. The NYMEX reformulated gasoline blendstock for October rose 2¢ to a rounded $2.03/gal.
Brent crude oil for November increased 68¢ to $79.74/bbl on London’s International Commodity Exchange. The December contract gained 73¢ to $79.29/bbl. The gas oil contract for October was $695.25/tonne.
OPEC’s basket of crudes for Sept. 12 averaged $77.16/bbl, up $1.14.
