Oil Price Forecast for Autumn

In Focus

Oil prices returned to growth on Tuesday due to conflicting data from the updated forecast by the EIA and the preliminary assessment of US inventories by the API. Market participants preferred to focus on positive factors, supporting the upward trend. Brent price targets remain in the range of $87–90 per barrel.

EIA Market Forecast

In the latest forecast for energy markets (STEO) published by the EIA, agency analysts raised the projection for global fuel consumption in 2023 by 30,000 barrels per day (b/d), reaching 101.19 million b/d. The growth compared to 2022 levels remains at 1.76 million b/d.

The forecast for the increase in oil supply in 2023 is set at 1.4 million b/d. The increase of 2.1 million b/d outside OPEC is partially compensated by production cuts within the cartel. In 2024, global production is expected to rise by 1.7 million b/d, of which 1.2 million b/d will be attributed to non-OPEC countries, including the US, Brazil, Canada, Guyana, and Norway.

The average production level in the US is raised to 12.76 million b/d in 2023 and 13.09 million b/d in 2024. The forecast for December 2023 production is increased from 12.66 million b/d to 12.96 million b/d. Considering the stagnant drilling activity, this projection appears overly optimistic. The agency likely anticipates a sharp increase in production in the autumn in response to high prices.

The supply deficit forecast for the third quarter of 2023 has been lowered from 1 million b/d to 640,000 b/d. In the fourth quarter, instead of a deficit of 0.4 million b/d, the EIA now expects only 0.12 million b/d. Exiting the deficit is anticipated as early as the first quarter of 2024.

The forecast for the average Brent crude price for the second half of 2023 has increased by $7 to $86 per barrel. The estimate for 2024 has risen by $3 to $86.5 per barrel.

The EIA report leaves a mixed impression. The agency significantly raised its supply forecast, which led to a reduction in the expected deficit, and a surplus could emerge as early as the beginning of 2024. At the same time, the forecast for average Brent prices was increased. The initial market reaction was positive, but the market might not rush to draw further conclusions, carefully studying the presented data over the next few days.

US Inventories: API Assessment

The American Petroleum Institute assessed the dynamics of oil and petroleum product inventories last week. Crude oil inventories might have increased by 4.1 million barrels after a significant drop of 17 million barrels the previous week. Gasoline and distillate inventories decreased by 0.4 and 2.1 million barrels, respectively.

The data is giving a mixed impression. Ahead of the official statistics from the EIA, these figures might not have a significant impact on prices. As of this morning, Brent futures are down by 0.1% and are trading around $86 per barrel.