In the June issue Short-Term Energy Outlook (STEO), the US Energy Information Administration (EIA) reduced its forecast for OPEC+ oil production for the remainder of the year following the extension of OPEC+ cuts through third-quarter 2024.
In the May outlook, EIA had assumed OPEC+ would begin to relax some voluntary production cuts beginning in this year's third quarter. The agency now expects OPEC+ will not begin relaxing voluntary cuts until fourth-quarter 2024, in line with the group’s recent announcement.
The Brent crude oil spot price averaged $82/bbl in May, down $8/bbl from April. Daily spot prices also initially fell following the OPEC+ announcement on June 2, closing at $78/bbl on June 6. “We expect less OPEC+ production for the rest of this year will cause Brent prices to rise to an average of $85/bbl during second-half 2024. Because of less OPEC+ production, we expect more oil will be withdrawn from global inventories in second-half 2024 than we did last month,” EIA said.
However, despite more inventory draws in this month’s forecast, EIA lowered its expectation for the annual average Brent price in 2024 ($84/bbl) compared with the May STEO ($88/bbl) to reflect the lower starting point for the forecast resulting from the recent price decline.
Global oil balance
Global oil inventories fell by an estimated 300,000 b/d in first-half 2024, and EIA expects they will decrease by an average of 600,000 b/d from third-quarter 2024 through first-quarter 2025.
“Following the start of the phaseout of voluntary OPEC+ supply cuts in fourth-quarter 2024 and supported by the ongoing supply growth from countries outside of OPEC+, we expect growth in global oil supply will outweigh growth in global oil demand growth, returning the market to moderate inventory builds for most of 2025. We forecast that global oil inventories will begin increasing at an average of 400,000 b/d in second-quarter 2025 and will increase by around 600,000 b/d in the second half of 2025,” EIA said.
As a result, EIA expects oil prices will increase to an average of $87/bbl in fourth-quarter 2024 and $88/bbl in first-quarter 2025. As global oil inventories rise during most of 2025, Brent crude oil price will gradually fall to an average of $83/bbl by fourth-quarter 2025.
EIA forecasts production outside of OPEC+ to increase by almost 2 million b/d in 2024, led by increasing production from the US, Canada, Brazil, and increasingly Guyana. Global production of petroleum and other liquid fuels will increase by 780,000 b/d in 2024, which is about 200,000 b/d less than in last month’s STEO because of the extension of voluntary OPEC+ production cuts through third-quarter 2024. EIA now expects OPEC+ liquid fuels production to decrease by 1.2 million b/d in 2024.
In 2025, EIA expects that global production of liquid fuels will increase by 2.2 million b/d. “As the gradual phaseout of the first round of OPEC+ voluntary production cuts unfold throughout the year, OPEC+ production increases by 700,000 b/d combined with 1.4 million b/d of production growth from countries outside of OPEC+,” EIA said.
Global consumption of liquid fuels will increase by 1.1 million b/d in 2024 and 1.5 million b/d in 2025. Most of the expected growth is from non-OECD countries, which increase their liquid fuels consumption by 1.1 million b/d in 2024 and 1.3 million b/d in 2025.
US crude oil production
EIA also forecasts US crude oil production to grow 2% from 2023 to an annual average of 13.2 million b/d in 2024 and by another 4% in 2025 to 13.7 million b/d. Increasing production is led by the Permian basin region, which is the source of almost 50% of domestic crude oil production, followed by the Eagle Ford region and the Federal Gulf of Mexico.
US natural gas
EIA expect US marketed natural gas production to fall by 1% in 2024 because of low natural gas prices. Marketed natural gas production in the Haynesville region falls by 9% this year and production in the Appalachia region falls by 4%. The forecast declines are partly offset by growth of 4% in the Permian basin region. EIA forecasts US marketed natural gas production will increase by 2% next year, with growth in all three of these regions, as natural gas prices rise in the forecast.
A drop in US natural gas production in 2024 will continue to put upward pressure on the Henry Hub natural gas spot price. EIA expects that the Henry Hub spot price will average $2.50/MMbtu this year, 13% higher than predicted last month, with prices rising to $3.30/MMbtu in December 2024 from $2.12/MMbtu in May.
