EIA: World oil prices may inch higher in fourth quarter

The U.S. Energy Information Administration, in its latest short-term energy outlook, predicts oil prices will increase only slightly over the next several months. EIA said refiners' acquisition costs for imported oil, its proxy for a "world oil price," are expected to average $11.42/bbl in the third quarter before increasing to $12.49/bbl for the fourth quarter. It said prices should increase slightly next year, but its projected average price of $13.65/bbl is still nearly $5/bbl less than

Sept. 21, 1998

2 min read

The U.S. Energy Information Administration, in its latest short-term energy outlook, predicts oil prices will increase only slightly over the next several months.

EIA said refiners' acquisition costs for imported oil, its proxy for a "world oil price," are expected to average $11.42/bbl in the third quarter before increasing to $12.49/bbl for the fourth quarter.

It said prices should increase slightly next year, but its projected average price of $13.65/bbl is still nearly $5/bbl less than in 1997 and nearly $7/bbl less than in 1996. EIA said prices will remain weak due to both supply and demand factors.

Supply

"On the supply side, even with an assumed 85% compliance rate in the Organization of Petroleum Exporting Countries' cuts announced at the end of June for the third quarter of 1998ellipseEIA is still forecasting world oil supply to exceed world oil demand by nearly 600,000 b/d (over 200 million bbl) in 1998.

"And this follows 1997, a year in which EIA estimates world oil supply exceeded world oil demand by over 800,000 b/d (300 million bbl over the course of the year).

"This has returned inventories to historically high levels and has helped keep prices from rising substantially following the latest announced cuts in production by OPEC and some non-OPEC producers."

Demand

On the demand side, EIA is forecasting a drop in Asian oil demand (including China and Japan), even though this region averaged growth in oil demand of over 850,000 b/d during 1992-96.

EIA said, "The outlook would even be gloomier if not for China. Our forecast still calls for a 6-7% growth rate in Chinese oil demand in 1998 and 1999, an increase of over 500,000 b/d (during) 1997-99.

"While we do expect some recovery in the rest of Asia in 1999, the region is still expected to consume oil at an average rate nearly 1 million b/d less in 1999 than we projected as recently as April.

"Currently, EIA projects that 1998 world oil demand (excluding the Former Soviet Union and Eastern Europe) will grow by less than 1 million b/d from 1997, the lowest such increase since 1990 (when the price shock of Iraq's invasion of Kuwait caused oil demand to stagnate)."