The U.S. Energy Information Administration (EIA) published its April Short-Term Energy Outlook (STEO), with updated analysis of current dynamics in the energy sector.
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EIA also published its Summer Fuels Outlook, an annual supplement examining motor fuel prices through the U.S. summer driving season.
EIA’s forecasts remain highly uncertain, largely due to the variety of ways nations, energy producers, and the market could respond to Russia’s further invasion of Ukraine. Russia’s actions came at a time when global inventories of crude oil, natural gas, and coal were below average, contributing to continued price volatility and high prices.
High energy costs are reflected in U.S. gasoline and diesel prices, which hit multiyear highs in March. In the Summer Fuels Outlook, EIA forecasts that the average price of gasoline and the average price of diesel will be the highest inflation-adjusted prices since the summer of 2014.
The April Short-Term Energy Outlook (STEO) is subject to heightened levels of uncertainty resulting from a variety of factors, including Russia’s further invasion of Ukraine. This STEO assumes U.S. GDP will grow by 3.4% in 2022 and by 3.1% in 2023, following growth of 5.7% in 2021. EIA uses the S&P Global macroeconomic model to generate our U.S. economic assumptions.
Global macroeconomic assumptions in our forecast are from Oxford Economics and include global GDP growth of 4.0% in 2022 and 3.7% in 2023, compared with growth of 6.0% in 2021. A wide range of potential macroeconomic outcomes could significantly affect energy markets during the forecast period.
Energy supply uncertainty results from the conflict in Ukraine, the production decisions of OPEC+, and the rate at which U.S. oil and natural gas producers increase drilling.
The Brent crude oil spot price averaged $117 per barrel (b) in March, a $20/b increase from February. Crude oil prices increased following the further invasion of Ukraine by Russia. Sanctions on Russia and other actions contributed to falling oil production in Russia and created significant market uncertainties about the potential for further oil supply disruptions.
These events occurred against a backdrop of low oil inventories and persistent upward oil price pressures. Global oil inventory draws averaged 1.7 million barrels per day (b/d) from the third quarter of 2020 (3Q20) through the end of 2021.
EIA estimates that commercial oil inventories in the OECD ended 1Q22 at 2.61 billion barrels, up slightly from February, which was the lowest level since April 2014.
EIA expects the Brent price will average $108/b in 2Q22 and $102/b in the second half of 2022 (2H22). EIA expects the average price to fall to $93/b in 2023. However, this price forecast is highly uncertain.
Actual price outcomes will depend on the degree to which existing sanctions imposed on Russia, any potential future sanctions, and independent corporate actions affect Russia’s oil production or the sale of Russia’s oil in the global market.
In addition, the degree to which other oil producers respond to current oil prices, as well as the effects macroeconomic developments might have on global oil demand, will be important for oil price formation in the coming months.
Although EIA reduced Russia’s oil production in our forecast, EIA still expects that global oil inventories will build at an average rate of 0.5 million b/d from 2Q22 through the end of 2023, which EIA expects will put downward pressure on crude oil prices. However, if production disruptions—in Russia or elsewhere—are more than EIA forecast, the resulting crude oil prices would be higher than our current forecast.
EIA estimates that 98.3 million b/d of petroleum and liquid fuels was consumed globally in March 2022, an increase of 2.4 million b/d from March 2021. EIA forecast that global consumption of petroleum and liquid fuels will average 99.8 million b/d for all of 2022, which is a 2.4 million b/d increase from 2021.
However, this forecast is down by 0.8 million b/d from last month’s forecast as a result of downward revisions to global GDP growth from Oxford Economics. EIA forecast that global consumption of petroleum and liquid fuels will rise by 1.9 million b/d in 2023 to average 101.7 million b/d. The outlook for economic growth and oil consumption in Russia and surrounding countries continues to be highly uncertain. ■