ARKANSAS, January 9 (Future Headlines)- The U.S. Energy Information Administration (EIA) released its Short-Term Energy Outlook (STEO) on Tuesday, providing insights into the nation’s crude oil production over the next two years. The report forecasts record-breaking U.S. crude production, reaching 13.21 million barrels per day (bpd) in 2023. However, the growth rate is expected to slow due to factors such as efficiency gains and reduced drilling activity. This article delves into the key elements of the EIA’s outlook, including production projections, global oil prices, OPEC+ dynamics, and potential disruptors to the market.
The EIA forecasts U.S. crude production to increase by 290,000 bpd in 2023, reaching a record 13.21 million bpd. The rise in production is attributed to efficiency gains despite a decline in rig activity, showcasing the industry’s ability to optimize operations. While new production records are anticipated in 2024 and 2025, the growth rate is expected to decelerate compared to the 1 million bpd growth projected for 2023.
OPEC+ production, excluding Angola, is forecasted to decline by 620,000 bpd in 2023, reaching 36.44 million bpd. The decline in OPEC+ output is part of the group’s strategy to bolster oil prices by implementing production cuts. Before the COVID-19 pandemic, the five-year average OPEC+ production stood at 40.2 million bpd, underscoring the impact of the pandemic on global oil markets.
The EIA projects Brent crude, the global benchmark, to average $82 per barrel in 2024 and $79 in 2025. These price forecasts are in line with the 2023 average of $82 per barrel, indicating a relatively stable pricing environment. The agency acknowledges OPEC+’s efforts to prevent significant price declines but anticipates a scenario where global production could exceed consumption by mid-2025, leading to increased petroleum inventories.
The EIA highlights potential disruptors to oil markets, including heightened tensions in the Middle East and attacks on ships in the Red Sea. Geopolitical uncertainties and regional conflicts have the potential to disrupt trade flows and elevate oil prices, emphasizing the delicate balance in the global energy landscape. Oil prices experienced a 2% increase on the day of the EIA’s report, driven by concerns over geopolitical tensions in the Middle East and a supply outage in Libya.
Brent crude futures were trading around $77.91 per barrel, while U.S. West Texas Intermediate (WTI) futures were at $72.72 per barrel. On the demand side, the EIA anticipates a growth of 1.4 million bpd in global liquid fuels consumption in 2024 and 1.2 million bpd in 2025. The projected growth is lower than the 1.9 million bpd witnessed in 2023, attributed to factors such as a weaker Chinese economy, increasing vehicle fleet efficiency, and the normalization of pandemic recovery-related growth.
Reporting by Moe Khaled; Editing by Sarah White