In its latest Short-Term Energy Outlook, the US Energy Information Administration forecasts US crude oil production to average 10.6 million b/d in 2018 and 11.2 million b/d in 2019, both of which are 300,000 b/d higher than forecast in the January STEO.
"The higher production reflects both the incorporation of recently reported survey data that was higher than expected in the previous STEO and a higher crude oil price forecast," EIA said.
Brent crude oil future prices closed above $70/bbl in mid-January for the first time since December 2014. Prices have increased over the past 7 months as oil inventories, both in the US and globally, have fallen steadily.
In January, oil prices may have received some support following the Organization of Petroleum Exporting Countries' monitoring committee in some form beyond the current expiration at yearend. Meanwhile, rapid decline in Venezuelan crude oil output are also likely contributing to higher crude oil prices. Improved global economic growth expectations could also be supporting oil prices. The International Monetary Fund (IMF) recently forecast that world gross domestic product would increase 3.9% in both 2018 and 2019, both 0.2 percentage points higher than its previous forecast.
Crude oil inventories in the US declined 6 million bbl during the first 4 weeks of 2018 in contrast to a 5-year average build of 14 million bbl during those 4 weeks. High level of refinery inputs of crude oil and crude oil exports contributed to the counterseasonal draw in crude oil inventories.
Like the draw in the US inventories, oil inventories from the Organization for Economic Cooperation and Development also declined. EIA estimated OECD total petroleum inventories at 2.87 billion bbl, a decline of 183 million bbl from January 2017-the largest year-over-year decline since March 2003.
However, a continued acceleration in non-OPEC supply growth is expected to contribute to global total petroleum and other liquids inventories rising by 200,000 b/d in 2018.
"This expected modest increase in global oil inventories could put downward pressure in crude oil prices in the coming months," EIA said. The agency forecasts Brent crude oil prices to decline to $60/bbl and the West Texas Intermediate prices to decline to $56/bbl by this year's third quarter.
In the STEO, EIA also expects the Henry Hub natural gas spot price to average $3.20/MMbtu in 2018, which is 31¢ higher than forecast in the January STEO. The higher price forecast partly reflects record inventory draws during January, which lowered expected storage levels through 2018 in the forecast.
