EIA continues to cut price forecasts for US crude oil, gasoline

Weakening global demand and higher Libyan oil exports have driven down North Sea Brent crude oil spot prices to an average of $97/bbl in September, a decrease of $5/bbl from August and the first month Brent crude oil prices have fallen below $100/bbl since June 2012.

Weakening global demand and higher Libyan oil exports have driven down North Sea Brent crude oil spot prices to an average of $97/bbl in September, a decrease of $5/bbl from August and the first month Brent crude oil prices have fallen below $100/bbl since June 2012.

In its most recent Short-Term Energy Outlook (STEO), the US Energy Information Administration forecasts Brent crude oil prices to average $104/bbl in 2014 and $102/bbl in 2015, $2/bbl and $1/bbl lower, respectively, than forecast in last month’s STEO.

WTI crude oil spot prices fell from a monthly average of $97/bbl in August to $93/bbl in September. The discount of WTI crude oil to Brent crude oil fell from an average of $8/bbl during this year’s first half to an average of $4/bbl in the third quarter, reflecting high refinery runs.

EIA now forecasts WTI crude oil prices to average $91/bbl in this year’s fourth quarter—$2/bbl lower than last month’s STEO—and average $95/bbl in 2015. The discount of WTI to Brent crude oil is forecast to widen from current levels, averaging $7/bbl in this year’s fourth quarter and in 2015.

Driven in large part by falling crude oil prices, US regular gasoline retail prices fell to an average of $3.41/gal in September, 29¢ below the June average, and are projected to continue to decline to an average $3.14/gal in December. EIA expects US regular gasoline retail prices, which averaged $3.51/gal in 2013, to average $3.45/gal in 2014 and $3.38/gal in 2015, both lower than last month’s STEO.

Global oil market

Global disruptions to near-term supply have abated since June, when Libya’s production and exports were at a minimal level, and violence in northern Iraq escalated. In September, unplanned crude oil supply disruptions among OPEC producers averaged 2.2 million b/d, 200,000 b/d lower than the previous month because of decreased outages in Libya.

“Iraq’s southern crude oil exports still remain unaffected by the unrest in northern Iraq. In Libya, production averaged 0.8 million b/d in September, its highest level in more than 1 year,” EIA said, adding that the security situation in Libya is however still precarious.

EIA expects OPEC crude oil production to fall 200,000 b/d in 2014 to 29.68 million b/d and by more than 400,000 b/d in 2015 to 29.24 million b/d, in accommodating the increase of non-OPEC supply.

Non-OPEC liquid fuels production is forecast to increase 1.9 million b/d in 2014 and 1.2 million b/d in 2015, averaging 55.98 million b/d and 57.15 million b/d, respectively, with the largest production growth from North America. This forecast assumes the current economic sanctions on Russian do not affect Russian oil production in the short term.

EIA expects worldwide liquid fuels consumption to rise by 1 million b/d in 2014 and by 1.2 million b/d in 2015, respectively, averaging 91.47 million b/d and 92.71 million b/d. EIA also expects a 200,000 b/d decline in consumption from countries in the Organization for Economic Cooperation and Development to 45.84 million b/d in 2014.

US oil, liquid fuels

With declines in the consumption of motor gasoline, hydrocarbon gas liquids, residual fuel oil, and other oils offsetting increases in distillate fuel and unfinished oils consumption, total US consumption of liquid fuels in 2014 is projected to average 18.92 million b/d, down 0.2% from 2013. Total consumption is expected to rise 170,000 b/d in 2015, with HGL consumption accounting for three fourths of the increase, according to EIA.

US crude oil production will average 8.5 million b/d this year, up from 7.4 million b/d last year, and 9.5 million b/d in 2015. Oil production from the Gulf of Mexico is expected to increase from 1.3 million b/d in 2013 to 1.6 million b/d in 2015, with 11 projects starting this year.

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