The US Energy Information Administration (EIA) predicted in the January 2024 Short-term Energy Outlook (STEO) that Brent crude oil prices will average $82/bbl in 2024, roughly the same as in 2023, and then fall to $79/bbl in 2025, when production growth will be slightly higher than demand growth, resulting in a modest build in inventories and some downward pressure on crude oil prices.
Despite the latest round of OPEC+ production cuts announced Nov. 30, oil prices have fallen due to continued concerns about global oil demand growth and rising global oil inventories, which EIA estimates increased by 800,000 b/d in fourth-quarter 2023. The Brent crude oil spot price averaged $78/bbl in December, down $5/bbl from November.
“We expect that OPEC+ production cuts will lead to global oil inventory withdrawals of 800,000 b/d on average in first-quarter 2024. After a period of relative balance from second-quarter 2024 through first-quarter 2025, we expect global oil inventories will build over the final three quarters of 2024 as slowing demand growth once again is outpaced by rising supply growth,” EIA said in the outlook.
EIA then expects falling global oil inventories in first-quarter 2024 will push Brent prices to an average $85/bbl in March. Relatively balanced markets for the rest of 2024 with some inventory builds in 2025 put slight downward pressure on crude oil prices through the remainder of EIA’s forecast. Thus, the average Brent crude oil price falls to $81/bbl in December 2024 and below $80/bbl in second-half 2025.
“However, several key uncertainties that could affect future prices remain. Heightened tensions around the critical Red Sea shipping channel and other developments in the Middle East have added upward price pressure since early December and have the potential to disrupt global oil trade flows and drive-up global oil prices further should they escalate or persist,” EIA added.
Global liquid fuels production
EIA expects global liquid fuels production to increase by 600,000 b/d in 2024, down from an increase of 1.7 million b/d in 2023.
“Global liquid fuels production growth in our forecast slows in 2024 because of both OPEC+ production cuts and slowing non-OPEC growth. OPEC+ crude oil production declines by 600,000 b/d in our forecast for 2024, which is offset by 1.2 million b/d of production growth outside of the group,” EIA said.
“Growth is lower in 2024 compared with 2023 in large part because of slowing supply growth from the US, Canada, and Brazil. Supply growth in Guyana accelerates this year in our forecast.”
Global liquid fuels production is expected to increase by 1.6 million b/d in 2025. The existing OPEC+ production targets announced at the June 2023 meeting expire at the end of 2024, which EIA expects will contribute to OPEC+ increasing crude oil production by 700,000 b/d in 2025. However, voluntary production cuts from Saudia Arabia and other OPEC+ countries will continue into 2025, to offset forecast production growth from outside the group of 900,000 b/d in 2025.
Global liquid fuels consumption
EIA forecasts global liquid fuels consumption to increase by 1.4 million b/d in 2024 and 1.2 million b/d in 2025. Most of EIA’s forecast liquid fuels demand growth is in non-OECD Asia, led by China and India.
EIA expects China’s liquid fuels consumption will rise by 300,000 b/d in 2024 and by 200,000 b/d in 2025, slowing from the 800,000 b/d of estimated growth in 2023, as GDP growth slows from post-pandemic levels and vehicle fleet efficiency continues to improve. India’s liquid fuels consumption in the forecast increases by an average of 300,000 b/d in both 2024 and 2025, the same as in 2023. In OECD countries, liquid fuels consumption growth is mostly flat in 2024 and 2025.
US crude oil production
After US crude oil production increased to a new record in 2023, EIA forecasts US crude oil production will grow more slowly in 2024 and 2025, still reaching new records in those years.
“US crude oil production depends on rig activity and well-level productivity to offset natural declines from existing wells. Our WTI price forecast falls gradually from a peak of $81/bbl in March 2024 to $74/bbl by December 2025. We expect that improved well productivity will increase US crude oil production by 300,000 b/d in 2024 and 200,000 b/d in 2025. The resultant production would establish new records in both years,” EIA said.
Crude oil production growth in the Lower 48 (L48) is mostly limited to the Permian basin region of western Texas and eastern New Mexico.
“One of the main uncertainties in our forecast involves US producer investment. Since 2021, producers have prioritized debt reduction, dividend increases, and corporate acquisitions over capital expenditures. Producers increased capital expenditures in 2023, however, and further increases would suggest more active rigs than in our forecast. Offshore Federal Gulf of Mexico (GoM) production will grow slightly in both years as some new projects come online. GoM production is less price sensitive than L48 production and will grow because project investments made before the pandemic will begin production over the next 2 years. Overall, we expect US crude oil production will average 13.2 million b/d in 2024 and 13.4 million b/d in 2025,” EIA said.